The Hampshire Company manufactures umbrellas that sell for $12.50 each. In 2014, the company made and sold 60,000 umbrellas. The company had fixed manufacturing costs of $216,000. It also had fixed costs for administration of $79,525. The per-unit costs of each umbrella are as follows:

Direct Materials: $3.00

Direct Labor: $1.50

Variable Manufacturing Overhead: $0.40

Variable Selling Expenses: $1.10

Using the information above, perform a cost-volume-profit (CVP) analysis by completing the steps below. All CVP calculations should be completed in the Hampshire Company Spreadsheet. Note: The CVP analysis satisfies Part A of Section I.

Compute net income before tax.

Compute the unit contribution margin in dollars and the contribution margin ratio for one umbrella.

Calculate the break-even point in units and dollars of revenue. Note: This is a required part of the CVP analysis and satisfies Part C of Section I.

Calculate the margin of safety:

In units

In sales dollars

As a percentage

Calculate the degree of operating leverage.

Assume that sales will increase by 20% in 2015. Calculate the percentage of before-tax income for this increase. Provide calculations to prove that your percentage increase is correct based on the operating leverage calculated in step 5.

Compute the number of umbrellas that Hampshire is required to sell if it plans to earn $120,000 in income before taxes by using the target income formula. Proof your calculation.

A company that specializes in tours in England has offered to purchase 5,000 umbrellas at $11 each from Hampshire. The variable selling costs of these additional units will be $1.30 as opposed to $1.10 per unit. Also, this production activity will incur another $15,000 of fixed administrative costs. Should Hampshire agree to sell these additional 5,000 umbrellas to the touring business? Provide calculations to support your decision.

Additionally, complete Parts B and D of Section I as outlined in the Final Project Guidelines and Rubric document.

Section II: Inventory Management

The information below represents the beginning and ending inventory amounts along with the production and sales for the month in umbrella units.

Beginning Inventory: 0 Umbrellas

Production: 80,000 Umbrellas

Sales: 60,000 Umbrellas

Ending Inventory: 20,000 Umbrellas

Using the information provided above and the costs and sales information provided in Section I, complete the following in the Hampshire Company Spreadsheet in order to assist you in responding to all components of Section II:

Prepare a variable costing income statement.

Prepare an absorption costing income statement.

Additionally, complete Parts A through E of Section II as outlined in the Final Project Guidelines and Rubric document.

Please show formula or how you got your answer!!!!

Requirement 1
Hampshire Company
Variable Costing Income Statement
	Units	$
Sales	X	$		$
Variable Cost of Goods Sold:
Beginning Inventory			$
Direct Materials	X	$	$
Direct Labor	X	$	$
Manufacturing Overhead	X	$	$
Total Variable Costs			$
Cost of Good Available for Sale			$
Deduct Ending Inventory	X	$	$
Variable Costs of Goods Sold				$
Variable Selling Costs	X	$	$	$
Contribution Margin				$
Fixed Costs:
Fixed Manufacturing Costs				$
Fixed Administrative Costs				$
Operating Income				$
Requirement 2
Hampshire Company
Absorption Costing Income Statement
	Units	$
Sales	X	$		$
Variable Cost of Goods Sold:
Beginning Inventory			$
Direct Materials	X	$	$
Direct Labor	X	$	$
Manufacturing Overhead	X	$	$
Total Variable Costs			$
Allocated Fixed Manufacturing Costs	X	$	$
Cost of Good Available for Sale			$
Deduct Ending Inventory	X	$	$
Costs of Goods Sold				$
Gross Margin				$
Fixed Costs:
Variable Selling Costs	X	$		$
Fixed Administrative Costs				$
Operating Income				$