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Topper Sports, Incorporated, produces high-quality sports equipment. The companys Racket Division manufactures three tennis racketsthe Standard, the Deluxe, and the Prothat are widely used in

Topper Sports, Incorporated, produces high-quality sports equipment. The companys Racket Division manufactures three tennis racketsthe 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 $ 50.00 $ 75.00 $ 100.00
Variable expenses per racket:
Production $ 28.00 $ 33.00 $ 35.00
Selling (5% of selling price) $ 2.50 $ 3.75 $ 5.00

All sales are made through the companys own retail outlets. The Racket Division has the following fixed costs:

Per Month
Fixed production costs $ 128,000
Advertising expense 108,000
Administrative salaries 58,000
Total $ 294,000

Sales, in units, over the past two months have been as follows:

Standard Deluxe Pro Total
April 2,000 1,000 5,000 8,000
May 8,000 1,000 3,000 12,000

Required:

1-a. Prepare contribution format income statements for April.

1-b. Prepare contribution format income statements for May.

3. Compute the Racket Divisions break-even point in dollar sales for April.

4. Will the break-even point would be higher or lower with Mays sales mix than with Aprils sales mix?

5. Assume that sales of the Standard racket increase by $20,800. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $20,800? Do not prepare income statements; use the incremental analysis approach in determining your answer.

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