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Topper Sports, Incorporated, produces high-quality sports equipment. The company's Racket Division manufactures three tennis rackets-Standard, Deluxe, and Pro-widely used in amateur play. Selected information
Topper Sports, Incorporated, produces high-quality sports equipment. The company's Racket Division manufactures three tennis rackets-Standard, Deluxe, and Pro-widely used in amateur play. Selected information on the rackets is given below: Selling price per racket Variable expenses per racket: Production Selling (5% of selling price) Standard $ 55.00 Deluxe $ 70.00 Pro $ 100.00 $ 33.00 $ 2.75 $ 35.00 $ 3.50 $ 36.00 $ 5.00 All sales are made through the company's own retail outlets. The Racket Division has the following fixed costs: Fixed production costs Advertising expense Administrative salaries Total Per Month $ 142,000 122,000 72,000 $ 336,000 Sales, in units, over the past two months were as follows: April May Standard Deluxe 2,000 1,000 8,000 1,000 Pro Total 5,000 8,000 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 Division's break-even point in dollar sales for April. 4. Will the break-even point be higher or lower with May's sales mix than with April's sales mix? 5. Assume that sales of the Standard racket increase by $22,200. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $22,200? Do not prepare income statements; use the incremental analysis approach in determining your answer.
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