Ramada Company produces one golf cart model. A partially complete table of company costs follows:

Required:
1.	Complete the table. (Round your "Cost per Unit" answers to 2 decimal places.)

Number of Golf Carts Produced and Sold 800 Units 1000 Units 1200 Units

Total Costs

Variable Costs 700,000

Fixed Costs Per Year 240,000

Total Costs 940,000

Cost Per Unit

Variable Cost Per Unit

Fixed Cost Per Unit

Total Cost Per Unit

2.	Ramada sells its carts for $1,750 each. Prepare a contribution margin income statement for each of the three production levels given in the table.

Golf Carts Produced and Sold 800 Units 1000 Units 1200 Units

Contribution Margin

Net Operating Income

4.	Calculate Ramadas break-even point in number of units and in sales revenue. (Round your "Sales Revenue" and"Unit" answers to the nearest whole number.)

Break-Even Units Carts

Break-Even Sales

Revenue

5.	Assume Ramada sold 300 carts last year. Without performing any calculations, determine whether Ramada earned a profit last year.

	No
	Yes

6.	Calculate the number of carts that Ramada must sell to earn $22,500 profit.

Target Unit Sales Carts

7.	Calculate Ramadas degree of operating leverage if it sells 1,050 carts. (Round your answer to 4 decimal places.)

Degree of Operating Leverage

8.	Using the degree of operating leverage, calculate the change in Ramadas profit if sales are 20 percent less than expected. (Round your answer to 3 decimal places.)

Effect on Profit %

Pin Cushion Company produces two models of sewing basket. Information about Pin Cushions products is given below:

	Product A		Product B
Sales revenue	$	44,000	$	59,000
Less: Variable costs		17,800		26,200
Contribution margin	$	26,200	$	32,800
Total units sold		1,100		2,140

Pin Cushions fixed costs total $40,000.

Required:

2.	Calculate Pin Cushions break-even units and break-even sales revenue. (Round your "Sales Units" answer to the nearest whole number and "Sales Revenue" answer to 2 decimal places.

4.	Calculate the total sales necessary for Pin Cushion to earn a profit of $66,400. (Round your answers to 2 decimal places.)

5.	Calculate the sales revenue generated from each product line if Pin Cushion earns its target profit of $66,400. (Round your answers to 2 decimal places.)

1)

A company is trying to decide to pay employees a fixed salary or an hourly wage.

If the company decides to pay salaries, which statement is true?

(2pts)

Salaries increase total fixed costs and the contribution margin would be higher.

Paying salaries would have no affect on fixed costs or the contribution margin.

Salaries decrease the total fixed costs and the contribution margin would be lower.

2)

A company is trying to decide to pay employees a fixed salary or an hourly wage.

If the company decides to pay hourly wages, which statement is true?

(2pts)

Hourly wages would decrease the variable costs and decrease the contribution margin.

Hourly wages would increase the variable costs and decrease the contribution margin.

Hourly wages would increase the variable costs and increase the contribution margin.

3)

A company is trying to decide if they should pay commissions to the salespeople based on their total sales.

If the company decides to pay their salespeople commissions as stated above, which statement is true?

(2pts)

Variable costs and contribution margin would not be affected.

Variable costs and the break-even point would increase while the contribution margin and margin of safety would decrease.

Variable costs and the break-even point would decrease while the contribution margin and margin of safety would increase.

4)

A company is considering purchasing a building. The purchase of the building will increase their fixed costs.

This purchase will _______________ the break-even point?

(2pts)

Not affect

Decrease

Increase

5)

A company is considering purchasing a building. The purchase of the building will increase their fixed costs.

This purchase will _______________ the margin of safety?

(2pts)

Increase

Decrease

Not affect

6)

A company is considering purchasing a building. The purchase of the building will increase their fixed costs.

This purchase will _______________ the degree of operating leverage?

(2pts)

Decrease

Increase

Not affect