Question
Textra Sports, Inc., produces high-quality sports equipment. The company's Racket Division manufactures three tennis rackets the Standard, the Deluxe, and the Prothat are widely used
Textra Sports, Inc., produces high-quality sports equipment. The company's Racket Division manufactures three tennis rackets the Standard, the Deluxe, and the Prothat are widely used in amateur play. Selected information on the rackets is given below: |
Standard | Deluxe | Pro | ||||
Selling price per racket | $ | 47.00 | $ | 65.00 | $ | 86.00 |
Variable expenses per racket: | ||||||
Production | $ | 18.80 | $ | 22.75 | $ | 25.80 |
Selling (5% of selling price) | $ | 2.35 | $ | 3.25 | $ | 4.30 |
|
All sales are made through the company's own retail outlets. The Racket Division has the following fixed costs: |
Per Month | ||
Fixed production costs | $ | 107,000 |
Advertising expense | 106,000 | |
Administrative salaries | 57,000 | |
| | |
Total | $ | 270,000 |
| | |
|
Sales, in units, over the past two months have been as follows: |
Standard | Deluxe | Pro | Total | |
April | 3,000 | 2,000 | 6,000 | 11,000 |
May | 8,000 | 2,000 | 3,000 | 13,000 |
|
Required: | |
1-a. | Prepare contribution format income statements for April. (Round the "Total percent" answers to one decimal place. Input all amounts as positive values except losses which should be indicated by minus sign.) |
Standard | Deluxe | Pro | Total | |||||
Amount | % | Amount | % | Amount | % | Amount | % | |
$ | $ | $ | $ | |||||
Variable expenses: | ||||||||
| | | | | | | | |
Total variable expenses | ||||||||
| | | | | | | | |
$ | $ | $ | ||||||
| | | | | | | | |
Fixed expenses: | ||||||||
| ||||||||
Total fixed expenses | ||||||||
| ||||||||
$ | ||||||||
| ||||||||
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1-b. | Prepare contribution format income statements for May. (Round the "Total percent" answers to one decimal place. Input all amounts as positive values except losses which should be indicated by minus sign.) |
Standard | Deluxe | Pro | Total | |||||
Amount | % | Amount | % | Amount | % | Amount | % | |
$ | $ | $ | $ | |||||
Variable expenses: | ||||||||
| | | | | | | | |
Total variable expenses | ||||||||
| | | | | | | | |
$ | $ | $ | ||||||
| | | | | | | | |
Fixed expenses: | ||||||||
| ||||||||
Total fixed expenses | ||||||||
| ||||||||
$ | ||||||||
| ||||||||
|
3. | Compute the Racket Division's break-even point in dollar sales for April. (Round your intermediate calculations to 3 decimal places and final answer to the nearest dollar.) |
Break-even point in dollar sales | $ |
4. | Would the break-even point be higher or lower with May's sales mix than with April's sales mix? | ||||
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5. | Assume that sales of the Standard racket increase by $27,000. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $27,000? Do not prepare income statements; use the incremental analysis approach in determining your answer. (Input all amounts as positive values.) |
Tennis Rackets | Effect | Amounts |
Standard | Net operating income by | $ |
Pro | Net operating income by | $ |
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Also, I need the answer to the last part of the following question:
Tween, Inc., produces and sells highly faddish products directed toward the preteen market. A new product has come onto the market that the company is anxious to produce and sell. Enough capacity exists in the companys plant to produce 30,000 units each month. Variable expenses to manufacture and sell one unit would be $1.84, and fixed expenses would total $47,200 per month. |
The Marketing Department predicts that demand for the product will exceed the 30,000 units that the company is able to produce. Additional production capacity can be rented from another company at a fixed expense of $2,360 per month. Variable expenses in the rented facility would total $2.03 per unit, due to somewhat less efficient operations than in the main plant. The product would sell for $2.90 per unit. |
(Round your intermediate calculations to nearest whole number, except per unit value which should be rounded to 2 decimal places. Round your final answers to nearest whole number.) |
Required: |
1. | Compute the monthly break-even point for the new product in units and in total dollar sales. |
Break-even point in unit sales | units |
Break-even point in dollar sales | $ |
|
2. | How many units must be sold each month to make a monthly profit of $10,527? |
Total units to be sold | units |
3. | If the sales manager receives a bonus of 15 cents for each unit sold in excess of the break-even point, how many units must be sold each month to earn a return of 24% on the monthly investment in fixed expenses? |
Total units to be sold |
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