Answered step by step
Verified Expert Solution
Question
1 Approved Answer
QUESTION 3: 20 marks SHOW ALL SUPPORTING CALCULATIONS FOR THIS PROBLEM. NO MARKS WILL BE AWARDED FOR ANSWERS TO THE PROBLEMS UNSUPPORTED BY CLEARLY SHOWN
QUESTION 3: 20 marks SHOW ALL SUPPORTING CALCULATIONS FOR THIS PROBLEM. NO MARKS WILL BE AWARDED FOR ANSWERS TO THE PROBLEMS UNSUPPORTED BY CLEARLY SHOWN CALCULATIONS. Denbury Hospitality Products, Inc. is a small-sized food product manufacturer based in the Rocky Mountain regions of the US mid-west. The company started operations in January 2005 and quickly gained a reputation for its highly popular birthday cakes, which the company sells for $400 each. The following information regarding estimated revenues and costs relating to the birthday cakes is taken from the company's budget for the year 2022: Net sales Direct materials Direct labour Manufacturing overhead - variable Manufacturing overhead - fixed $640,000 Selling expenses - variable $140,000 Selling expenses fixed $36,000 Administrative expenses - variable $31,000 Administrative expenses fixed $20,000 $19,000 $30,000 $15,000 $17,000 Required: 1. Assuming fixed costs and net sales are spread evenly throughout the year, calculate the company's monthly break-even point in (1) units and (2) dollars. 6 marks 2. Calculate the contribution margin ratio, the annual margin of safety ratio, and the annual profit. 6 marks 3. Assume the price remains at $400 per unit and variable costs remain the same per unit, but fixed costs increase by 20% annually. Calculate the percentage increase in unit sales required to achieve the same level of annual profit calculated in part (2). 4 marks 4. Return to the original cost estimates and determine the sales required to earn an operating income of $390000 after tax. The company's income tax rate is 10%. 4 marks
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started