WellsleyHigh Fashions Company manufactured and sold 1,000 pair of leather handbags during July. Selected data for this month follow.

There were no beginning or ending inventories.

Sales

$150,000

Direct materials used

37,000

Direct labour

15,000

Variable manufacturing overhead

15,000

Fixed manufacturing overhead

17,000

Variable selling and administratve expenses

?

Fixed selling and administrative expenses

?

Contribution margin

65,000

Operating income

38,000

1 & 2. What were the fixed and variable selling and administrative expenses for July? Complete the contribution margin income statement to solve for these amounts.

	In Dollars
Sales		150000
Variable Expenses:
Direct materials used	37,000
Variable manufacturing overhead	15,000
Direct labour	15000
Variable selling and administrative expenses	18000
Total variable expenses		85000
Contribution margin		65000

Fixed Expenses:
Fixed manufacturing overhead	17000
Fixed selling and administrative expenses	10000
Total fixed expenses		27000
Operating income		38000

3. What was the cost of goods sold during July under absorbtion costing?

Cost of Goods Sold
Direct materials used	37000
Direct labour	15000
Variable manufacturing overhead	15000
Fixed manufacturing overhead	17000
Total Cost of Goods Sold	84000

4a. Assume that the fixed selling and administrative expenses for July amounted to

$10,625.

What was thebreak-even point in units for July?

First enter the formula, then compute the break-even point in units.

Total fixed expenses	/	Contribution margin per unit	=	Break-even units
	/		=

4b. Assume that the fixed selling and administrative expenses for July amounted to

$10,625.

How many units must be sold to earn a target operating income of

$16,575?

First enter the formula, then compute the target number of units.

(	Total fixed expenses	+	Target profit	) /	Contribution margin per unit	=	Target # of units
(		+		) /		=

4c. Assume that the fixed selling and administrative expenses for July amounted to

$10,625.

What would the selling price per unit have to be if the company wanted to earn an operating income of

$43,575 on the sale of 890890 units?

Begin by identifying the general formula to be used as a starting point to solve for the sales price per unit. (SP = Sales price and VC = variable cost.)

(

x

)-

=

Target operating income

Now compute the selling price per unit. (Round your answer to two decimal places.)

The selling price per unit have to be $