Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Thornton Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactions during year 1. All purchases and sales

Thornton Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactions during year 1. All purchases and sales were made with cash. 1. Acquired $910,000 of cash from the owners. 2. Purchased $350,000 of manufacturing equipment. The equipment has a $46,000 salvage value and a four-year useful life. 3. The company started and completed 6,600 modems. Direct materials purchased and used amounted to $56 per unit. 4. Direct labor costs amounted to $41 per unit. 5. The cost of manufacturing supplies used amounted to $20 per unit. 6. The company paid $66,000 to rent the manufacturing facility. 7. Thornton sold all 6,600 units at a cash price of $200 per unit. 8. The sales staff was paid a $14.00 per unit sales commission. 9. Paid $55,000 to purchase equipment for administrative offices. The equipment was expected to have a $4,600 salvage value and a three-year useful life. 10. Administrative expenses consisting of office rental and salaries amounted to $90,290. Required a. Use the following partially completed form to prepare an income statement using the contribution margin format. b. Determine the break-even point in units and in dollars. c. Assume that next year's sales are budgeted to be the same as the current year's sales. Determine the margin of safety expressed as a percentage. Assume that next year's sales are budgeted to be the same as the current year's sales. Determine the margin of safety expressed as a percentage. (Round intermediate calculations to nearest whole number and final answer to 2 decimal places. (i.e., .2345 should be entered as 23.45)) Margin of safety expressed %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Scoreboard Your Practice 7 Numbers To Understand Your Design Firms Financials

Authors: Rick J Linley

1st Edition

1039138985, 978-1039138988

More Books

Students also viewed these Accounting questions

Question

7. Where Do We Begin?

Answered: 1 week ago