There are two part to the homework. part 1 my answers are not matching the books.

Best Harmonica Company manufactures and sells harmonicas to distributors. The model they produce sells to the distributors for $8.00 each. Following are cost estimates: Sales Direct materials Direct labor Manufacturing overhead-variable Manufacturing overhead-fixed Selling expenses-variable Selling expenses-fixed Administrative expenses-variable Administrative expenses-fixed $3,480,000 543,750 761,250 152,250 640,000 78,300 300,000 47,850 185,000 Instructions A. B. C. D. E. Prepare a CVP income statement based on these cost estimates. Commute contribution margin ratio. Compute the break-even point in (1) units and (2) dollars. Compute the margin of safety ratio. Determine the sales dollars required to earn net income of $1,000,000. Best Harmonica Company Cost Volume Profit Income Statement Sales Variable manufacturing cost Variable selling cost Variable administrative cost Contribution Margin Fixed manufacturing cost Fixed selling cost Fixed administrative cost Net income Contribution margin ratio: contribution margin / sales Break even dollars: fixed cost $ / contribution margin % Break even units: break even $ / sell price Margin of safety ratio: (sales - breakeven $ )/ sales Sales to earn $1,200,000: (fixed cost + target income) / contribution margin % 3,480,000 1,457,250 78,300 47,850 640,000 300,000 185,000 1,583,400 1,896,600 1,125,000 771,600 54.5% 2,064,220 516,055 40.7% 2,284,404 Best Harmonica Company manufactures and sells harmonicas to distributors. The model they produce sells to the distributors for $8.00 each. Following are cost estimates: Sales Direct materials Direct labor Manufacturing overhead-variable Manufacturing overhead-fixed Selling expenses-variable Selling expenses-fixed Administrative expenses-variable Administrative expenses-fixed $3,480,000 543,750 761,250 152,250 640,000 78,300 300,000 47,850 185,000 Instructions A. B. C. D. E. Prepare a CVP income statement based on these cost estimates. Commute contribution margin ratio. Compute the break-even point in (1) units and (2) dollars. Compute the margin of safety ratio. Determine the sales dollars required to earn net income of $1,000,000. Best Harmonica Company Cost Volume Profit Income Statement Sales Variable manufacturing cost Variable selling cost Variable administrative cost Contribution Margin Fixed manufacturing cost Fixed selling cost Fixed administrative cost Net income Contribution margin ratio: contribution margin / sales Break even dollars: fixed cost $ / contribution margin % Break even units: break even $ / sell price Margin of safety ratio: (sales - breakeven $ )/ sales Sales to earn $1,200,000: (fixed cost + target income) / contribution margin % 3,480,000 1,457,250 78,300 47,850 640,000 300,000 185,000 1,583,400 1,896,600 1,125,000 771,600 54.5% 2,064,220 516,055 40.7% 2,284,404 There are two problems this week. Click on the tab at the bottom of the spreadsheet to move to problem 2. Best Harmonica Company manufactures and sells harmonicas to distributors. The model they produce sells to the distributors for $8.00 each. Following are cost estimates: Sales Direct materials Direct labor Manufacturing overhead-variable Manufacturing overhead-fixed Selling expenses-variable Selling expenses-fixed Administrative expenses-variable Administrative expenses-fixed $3,480,000 543,750 761,250 152,250 640,000 78,300 300,000 47,850 185,000 Instructions a. Prepare a CVP income statement based on these cost estimates. b. Commute contribution margin ratio c. Compute the break-even point in (1) units and (2) dollars. d. Compute the margin of safety ratio. e. Determine the sales dollars required to earn net income of $1,000,000. Best Harmonica Company Cost Volume Profit Income Statement Sales Variable manufacturing cost Variable selling cost Variable administrative cost Contribution Margin Fixed manufacturing cost Fixed selling cost Fixed administrative cost Net income Contribution margin ratio: contribution margin / sales 3,480,000 3,480,000 3,480,000 100.0% Break even dollars: fixed cost $ / contribution margin % - Break even units: break even $ / sell price - Margin of safety ratio: (sales - breakeven $ )/ sales Sales to earn $1,000,000: (fixed cost + target income) / contribution margin % 100.0% 1,000,000 Problem 2 involves a fixed asset decision. FACTS: 1. Elliott Incorporated manufactures garden tools and the manufacturing equipment is perfectly functional but it is not modern. 2. Upgrading to modern equipment would speed up the manufacturing process such that direct labor and variable manufacturing costs would be reduced by 40% on a per unit basis. Hint: you do not need current units produced to calculate this problem. 3. The cost of such an upgrade is would equal $1,500,000 per year for depreciation and financing costs net of tax benefits of these costs. 4. The additional costs would be accounted for as fixed manufacturing overhead. 5. Elliott is currently operating at full capacity and management believes they could increase sales to $6,000,000 at current prices if they had additional capacity. Elliott's current sales and costs are as follows: Sales Direct materials Direct labor Manufacturing overhead-variable Manufacturing overhead-fixed Selling expenses-variable Selling expenses-fixed Administrative expenses-variable Administrative expenses-fixed $4,500,000 780,000 1,540,000 364,500 750,000 90,000 250,000 60,000 200,000 a. Prepare a CVP for Elliott based on the current production b. Compute contribution margin ratio for current production c. Compute breakeven dollars for current production d. Prepare a CVP based on proposed equipment upgrade e. Compute contribution margin ratio based on proposed equipment upgrade f. Compute breakeven dollars for current production g. Should Elliott proceed with the proposed upgrade? Elliott Incorporated CVP for current production Sales Variable manufacturing cost Variable selling cost Variable administrative cost Contribution Margin Fixed manufacturing cost Fixed selling cost Fixed administrative cost Net income 4,500,000 Contribution margin ratio: contribution margin / sales 1,665,500 37.0% 60,000 4,440,000 4,440,000 Break even dollars: fixed cost $ / contribution margin % - Elliott Incorporated CVP with equipment upgrade Sales Direct labor Direct materials Variable manufacturing overhead Variable selling cost Variable administrative cost Contribution Margin Fixed manufacturing cost Fixed selling cost Fixed administrative cost Net income Contribution margin ratio: contribution margin / sales Break even dollars: fixed cost $ / contribution margin % 6,000,000 1,540,000 780,000 364,500 6,000,000 6,000,000 100.0% - Should they do it? The numbers show that they would make more profit however the small increase in profit comes with a significant risk. The breakeven point jumps considerably so if management estimates are not correct about additional sales, the upgrade could be costly