P7-65 Find missing data in CVP relationships The budgets of four companies yield the following information: Company Q R S T Target Sales....................... $720,000 $328,750 $190,000 $__?___ Variable expenses............. 216,000 ? ? 270,000 Fixed expenses.................. ? $153,000 $90,000 ? Operating Income (loss).... $154,000 $ ? $ ? $133,000 ======== ======== ====== ========= Units sold........................... ? $131,500 12,000 18,000 Contribution margin per unit.. $ 6.00 ? $ 9.50 $ 35.00 Requirements 1. Fill in the blanks for each company. 2. compute breakeven, in sales dollars for each company. Which company has the lowest breakeven point in sales dollars? What causes the low breakeven piont? Problem # 2 7-66 Find breakeven and target profit and prepare income statements A traveling production of Jersey Boys performs each year. The average show sells 1,000 tickets at $60 a ticket. There are 120 shows each year. The show has a cast of 75, each earning an average of $300 per show. The cast is paid only after each show. The other variable expense is program printing costs of $9 per guest. Annual fixed expenses total $969,000 Requirements: 1. Compute revenue and variable expenses for each show. 2. Use the income statement equation approach to compute the number of shows needed annually to break even. 3. Use the shortcut unit contribution margin approach to compute the number of shows needed annually to earn a profit of $3,078,000. Is this goal realistic? Give your reason. 4. Prepare Jersey Boy's contribution margin income statement for 100 shows each year. Report only two categories of expenses: variable and fixed. Problem # 3 7-69 CVP analysis at a multiproduct firm The contribution margin income statement of Pepperpike Coffee for February follows: Pepperpike Coffee Contribution Margin Income Statement For month ended February 29 Sales revenue.......................................................................... $103,000 Variable expenses: Cost of goods sold.............................................................. $28,000 Marketing expense ............................................................ $ 10,000 General and administrative expense............................... $ 3,000 41,000 ----------- ----------- Contribution margin............................................................... $62,000 Fixed expenses: Marketing expense............................................................ $34,650 General and administrative expense............................... $ 7,350 42,000 -------------- ------------ Operating income...................................................................... $20,000 Pepperpike Coffee sells three small coffees for every large coffee. A small coffee sells for $3.00, with a variable expense of $1.50. A large coffee sells for $5.00, with a variable expense of $2.50 Requirements 1. Determine Pepperpike Coffee's monthly breakeven point in the numbers of small coffees and large coffees. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of expenses: variable and fixed. 2. Compute Pepperpike Coffee's margin of safety in dollars. 3. Use Pepperpike Coffee's operating leverage factor to determine its new operating income if sales volume increases 15%. Prove your results using the contribution margin income statement format. Assume the sales mix remains unchanged