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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,
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 $40 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 $500,000 Selling expenses - variable $150,000 Selling expenses - fixed $90,000 Administrative expenses variable $30,000 Administrative expenses fixed $40,000 $20,000 $30,000 $10,000 $20,000 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 $40 per unit and variable costs remain the same per unit, but fixed costs increase by 30% 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 orig #2 (Alt + A) mates and determine the sales required to earn an operating income of $360,000 after tax. The company's income tax rate is 40%. 4 marks
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