The following information relates to the only product sold by Harper Company: Sales price per unit $ 24 Variable cost per unit 18 Fixed costs per year 271,000 -------------------------------------------------------------------------------- a. Compute the contribution margin ratio and the dollar sales volume required to break even. Break-even sales volume $ b. Assuming that the company sells 75,000 units during the current year, compute the margin of safety sales volume (dollars). Margin of safety sales volume $ 
Thermal Tent, Inc. is a newly organized manufacturing business that plans to manufacture and sell 50,000 units per year of a new product. The following estimates have been made of the company's and expenses (other than income taxes): Fixed Variable per Unit Manufacturing costs: Direct materials $47 Direct labor 32 Manufacturing overhead $340,000 4 Period Costs: Selling expenses 1 Administrative expenses 200,000 _________ Totals: $540,000 $ 84 a. What should the company establish as the sales price per unit if it sets a target of earning an operating income of $260,000 by producing and selling 50,000 units during the first year of operations? (Hint: First compute the required contribution margin per unit.) Sales price per unit = $______________ b. At the unit sales price computed in part a, how many units must the company produce and sell to break even? (Assume all units produced are sold) Break-even sales volume ____________ units c. What will be the margin of safety (in dollars) if the company produces and sells 50,000 units at the sales price computed in part a? Using the margin of safety, compute operating income at 50,000 units. Operating income $________________ d. Assume that the marketing manager thinks that the price of this product must be no higher than $94 to ensure market penetration. Will setting the sales price at $94 enable Thermal Tent to break even, given the plans to manufacture and sell 50,000 units? YES or NO Thermal Tent, Inc. is a newly organized manufacturing business that plans to manufacture and sell 50,000 units per year of a new product. The following estimates have been made of the company's and expenses (other than income taxes): Fixed Variable per Unit Manufacturing costs: Direct materials $47 Direct labor 32 Manufacturing overhead $340,000 4 Period Costs: Selling expenses 1 Administrative expenses 200,000 _________ Totals: $540,000 $ 84 a. What should the company establish as the sales price per unit if it sets a target of earning an operating income of $260,000 by producing and selling 50,000 units during the first year of operations? (Hint: First compute the required contribution margin per unit.) Sales price per unit = $______________ b. At the unit sales price computed in part a, how many units must the company produce and sell to break even? (Assume all units produced are sold) Break-even sales volume ____________ units c. What will be the margin of safety (in dollars) if the company produces and sells 50,000 units at the sales price computed in part a? Using the margin of safety, compute operating income at 50,000 units. Operating income $________________ d. Assume that the marketing manager thinks that the price of this product must be no higher than $94 to ensure market penetration. Will setting the sales price at $94 enable Thermal Tent to break even, given the plans to manufacture and sell 50,000 units? YES or NO Thermal Tent, Inc. is a newly organized manufacturing business that plans to manufacture and sell 50,000 units per year of a new product. The following estimates have been made of the company's and expenses (other than income taxes): Fixed Variable per Unit Manufacturing costs: Direct materials $47 Direct labor 32 Manufacturing overhead $340,000 4 Period Costs: Selling expenses 1 Administrative expenses 200,000 _________ Totals: $540,000 $ 84 a. What should the company establish as the sales price per unit if it sets a target of earning an operating income of $260,000 by producing and selling 50,000 units during the first year of operations? (Hint: First compute the required contribution margin per unit.) Sales price per unit = $______________ b. At the unit sales price computed in part a, how many units must the company produce and sell to break even? (Assume all units produced are sold) Break-even sales volume ____________ units c. What will be the margin of safety (in dollars) if the company produces and sells 50,000 units at the sales price computed in part a? Using the margin of safety, compute operating income at 50,000 units. Operating income $________________ d. Assume that the marketing manager thinks that the price of this product must be no higher than $94 to ensure market penetration. Will setting the sales price at $94 enable Thermal Tent to break even, given the plans to manufacture and sell 50,000 units? YES or NO
