Part A Wilson Company sells lawn ornaments (rocks) with university athletic logos. The selling price of each lawn ornament is $25.00. The variable costs associated with each lawn ornament are $15.00 and the Fixed costs for the company are $100,000 per year. Ignore income taxes. Required 1. How many lawn ornaments does Wilson need to sell in order to break even? 2. Determine the dollar amount of sales that Wilson needs to make to generate a profit of $150,000 3. Prepare a contribution margin income statement for the year assuming that Wilson sold 25,000 lawn ornaments Calculate the margin of safety in dollars assuming the company expects sales consistent with selling 25.000 lawn ornaments. 5. The company is considering purchasing a machine to automate the production of lawn ornaments. Fixed costs will increase by 550,000 and variable costs will decrease by 57.50 per lawn ornament. Should the company pursue the purchase of the machine? Show calculations to support your decision. 4. The contribution margin income statement for the year ended December 31, 2015 follows: Sales revenue $225,000 Variable costs 90,000 Contribution margin 135,000 Fixed costs 75,000 Profit $60,000 Requirement 1: In order to Break even number of ornaments to be sold is Fixed costs $100,000 Selling price per unit $25.00 Variable Cost per unit $15.00 Contribution Margin unit $10.00 Breakeven Point $10,000.00 Requirement 2: To generate $150,000 profit Sales should be Fixed Costs Desired Profit Contribution Margin per unit $100,000 $150,000 $10.00 Sales at desired profit Sales in Value $25,000.00 unit $625,000 Requirement 3: Contribution Margin Statement Income Statement Sales Variable Costs Contribution Margin Fixed Costs Net Operating Income $625,000 $375,000 $250,000 $100,000 $150,000 Requirement 4: Calculation on MOS in Sales Fixed Costs Contribution Margin Ratio Breakeven point in Dollars Actual Sales Breakeven point in Dollars Margin of Safety in Dollars $100,000 40% $250,000 $625,000 $250,000 $375,000 Requirement 5: Should the machine be purchased? Sales Variable Costs Contribution Fixed Cost Profit Yes the machine should be purchased $625,000 $375,000 $437,500 $150,000 $287,500 Part B: Part B Bearcat Paws produces two sizes of Christmas Ornaments. The selling prices and variable costs are as follows: Selling price per ornament Variable cost per ornament Small $8.00 4.00 Large $20.00 8.00 The company sells three small Christmas ornaments for every large Christmas ornament. The contribution margin income statement for the year ended December 31, 2015 follows: Sales revenue Variable costs Contribution margin Fixed costs Profit $225,000 90,000 135,000 75,000 $60,000 Required 1. Calculate the weighted average contribution margin per unit for Bearcat Paws. 2. Determine the break-even point in units. 3. Determine the number small and the number of large ornaments that would need to be produced at the break-even point. 1. Calculate the weighted average contribution margin per unit for Bearcat Paws e Questiton please answer step by step
