Q1 The Blanchard Company manufactures a single product that sells for $175 per unit and has a total variable cost of $140 per unit. The company's annual fixed expenses are $514,500.

Q2. The Blanchard Company manufactures a single product that sells for $220 per unit and has a total variable cost of $176 per unit. The company's annual fixed expenses are $664,400.

(1) Prepare a Contribution Margin Statement for the Blanchard Company showing revenue, variable costs, and fixed costs at break-even.

(2) Suppose the firm's fixed costs increase by $136,000. How much revenue (in US dollars) is needed to break even?

Q3 The Blanchard Company manufactures a single product that sells for $136 per unit and has a total variable cost of $102 per unit. The company's annual fixed expenses are $496,400. Management is targeting annual pre-tax income of $850,000. Let's say fixed costs remain at $496,400.

Q4 The Blanchard Company manufactures a single product that sells for $120 per unit and has a total variable cost of $90 per unit. The company's annual fixed expenses are $624,000. The sales manager predicts that annual sales of the company's product will soon reach 39,400 units and the price will rise to $194 per unit. According to the production manager, variable costs are expected to increase to $134 per unit, but fixed costs will remain at $624,000. The income tax rate is 25%. How much pre-tax and after-tax profit can the company expect from these early changes?

Create an expected contribution margin profit and loss account.

Q5. Bloom Company management forecasts fixed expenses of $254,000 and pre-tax income of $411,600 for the coming period. The expected contribution margin ratio is 64%.

Necessary:

1. Calculate the total sales dollar amount.

2. Calculate the sum of variable costs.

Q6. Harrison Co. expects to sell 150,000 units of its product in the next year, which would generate total sales of $12,000,000. Management predicts that pre-tax net income for the coming year will be $1,200,000 and the contribution margin will be $30 per unit.

Fill in the table below to calculate your expected total fixed and variable costs for the coming year.

Q7 Hudson Co. Reports Contribution Margin Accounting for 2019.

hudson company | |||

Contribution Margin Accounting | |||

For the year ended December 31, 2019 | |||

Sale (10,100 units at $300 each) | p.s | 3.030.000 | |

Variable cost (10,100 units at $240 each) | 2.424.000 | ||

contribution margin | 606.000 | ||

fixed costs | 468.000 | ||

pre-tax income | p.s | 138.000 | |

**1.**Calculate the break-even point for Hudson Co. in units.**2.**Calculate the break-even point for Hudson Co. in sales dollars.

Q8 Hudson Co. Reports Contribution Margin Accounting for 2019.

hudson company | |||

Contribution Margin Accounting | |||

For the year ended December 31, 2019 | |||

Sale (10,100 units at $300 each) | p.s | 3.030.000 | |

Variable cost (10,100 units at $240 each) | 2.424.000 | ||

contribution margin | 606.000 | ||

fixed costs | 468.000 | ||

pre-tax income | p.s | 138.000 | |

**1.**Let's say Hudson Co. have a pre-tax sales goal of $167,000 for 2020. How much revenue (in US dollars) is needed to reach this revenue goal?**2.**If Hudson reaches his 2020 pre-tax income goal, what will be his margin of safety (percentage)?**(Round your answer to 1 decimal place.)**

Q9 Hudson Co. Reports Contribution Margin Accounting for 2019.

hudson company | |||

Contribution Margin Accounting | |||

For the year ended December 31, 2019 | |||

Sale (10,100 units at $300 each) | p.s | 3.030.000 | |

Variable cost (10,100 units at $240 each) | 2.424.000 | ||

contribution margin | 606.000 | ||

fixed costs | 468.000 | ||

pre-tax income | p.s | 138.000 | |

Suppose the company is considering investing in a new machine that will increase its fixed costs by $43,000 per year and decrease its variable costs by $8 per unit. Prepare an income statement of the expected contribution margin for 2020, assuming the company buys this machine.

Q10. Hudson Co. Reports Contribution Margin Accounting for 2019.

hudson company | |||

Contribution Margin Accounting | |||

For the year ended December 31, 2019 | |||

Sale (10,100 units at $300 each) | p.s | 3.030.000 | |

Variable cost (10,100 units at $240 each) | 2.424.000 | ||

contribution margin | 606.000 | ||

fixed costs | 468.000 | ||

pre-tax income | p.s | 138.000 | |

If the company raises its selling price to $320 per unit.**1.**Calculate the contribution margin per unit for Hudson Co.

**2.**Calculate the Contribution Margin Rate for Hudson Co.

**3.**Calculate the break-even point for Hudson Co. in units.

**4.**Calculate the break-even point for Hudson Co. in sales dollars.

Q11. Hudson Co. Reports Contribution Margin Accounting for 2019.

hudson company | |||

Contribution Margin Accounting | |||

For the year ended December 31, 2019 | |||

Sale (10,100 units at $300 each) | p.s | 3.030.000 | |

Variable cost (10,100 units at $240 each) | 2.424.000 | ||

contribution margin | 606.000 | ||

fixed costs | 468.000 | ||

pre-tax income | p.s | 138.000 | |

The marketing executive believes that increasing advertising expenses by $101,000 in 2020 will increase the company's sales volume to 11,500 units. Prepare an income statement of the expected contribution margin for 2020, assuming the business incurs additional advertising costs.

Q12. Nombre Company management expects variable expenses to be $720,000, fixed expenses to be $866,000, and pre-tax income to be $214,000 for the next period. Management also anticipates that the contribution margin per unit will be $15.

Q13. Handy Home sells windows and doors in the 8:2 ratio (windows:doors). The retail price for each window is $114 and the retail price for each door is $264. The variable cost for a window is $69.50 and for a door is $182.00. Fixed costs are $416,000.**(Type your “per unit” values to two decimal places.)**

F14. Company A is a manufacturer with sales of $3,800,000 and a profit margin of 50%. Your fixed costs are $1,320,000. Company B is a consulting firm with $3,700,000 in service revenues and a contribution margin of 25%. Your fixed costs are $370,000.

Calculate the degree of operating leverage (DOL) for each company. Which company benefits most from a 20% increase in sales?

Q15. The Praveen Co. manufactures and markets a variety of rope products. Management is considering the future of the XT product, a special hang-glider tether, which has not been as profitable as hoped. Because Product XT is manufactured and marketed independently of other products, its total cost can be accurately measured. Plans for next year call for a retail price of $200 per 100 yards of XT rope. Annual fixed costs are expected to be $270,000 for a maximum capacity of 550,000 yards of rope. Projected variable cost is $140 per 100 yards of XT cable.

**1.**Calculate the break-even point for product XT in sales units and sales dollars. (1 unit = 100 meters)**(Do not round intermediate calculations.)**

Q16. The Praveen Co. manufactures and markets a variety of rope products. Management is considering the future of the XT product, a special hang-glider tether, which has not been as profitable as hoped. Because Product XT is manufactured and marketed independently of other products, its total cost can be accurately measured. Plans for next year call for a retail price of $200 per 100 yards of XT rope. Annual fixed costs are expected to be $270,000 for a maximum capacity of 550,000 yards of rope. Projected variable cost is $140 per 100 yards of XT cable.

**2.**Create a Contribution Margin Income Statement showing revenue, variable costs, and fixed costs for Product XT at break-even.

Q17. The Henna Co. manufactures and sells two products, T and O. It manufactures these products in separate factories and markets them through various channels. You have no cost sharing. That year, the company sold 44,000 units of each product. Below are the sales and costs for each product.

Product T | product OR | ||||||||

offer | p.s | 774.400 | p.s | 774.400 | |||||

Variable costs | 464.640 | 154.880 | |||||||

contribution margin | 309.760 | 619.520 | |||||||

fixed costs | 187.760 | 497.520 | |||||||

pre-tax income | 122.000 | 122.000 | |||||||

Income tax (32% rate) | 39.040 | 39.040 | |||||||

net income | p.s | 82.960 | p.s | 82.960 | |||||

**Necessary:****1.**Calculate the breakeven sales dollar for each product.**(Enter the CM ratio as a percentage rounded to 2 decimal places.)**

Q18 Henna Co. manufactures and sells two products, T and O. It manufactures these products in separate factories and markets them through various channels. You have no cost sharing. That year, the company sold 44,000 units of each product. Below are the sales and costs for each product.

Product T | product OR | ||||||||

offer | p.s | 774.400 | p.s | 774.400 | |||||

Variable costs | 464.640 | 154.880 | |||||||

contribution margin | 309.760 | 619.520 | |||||||

fixed costs | 187.760 | 497.520 | |||||||

pre-tax income | 122.000 | 122.000 | |||||||

Income tax (32% rate) | 39.040 | 39.040 | |||||||

net income | p.s | 82.960 | p.s | 82.960 | |||||

**2.**Suppose the company expects sales of each product to drop to 27,000 units over the next year without changing the selling price per unit. Prepare expected financial results for the coming year, following the Contribution Margin Income Statement format as shown with columns for each of the two products (assume a 32% tax rate). Also assume that each pre-tax loss generates a 32% tax benefit.**(Round "per unit" to 2 decimal places. Enter tax losses and gains, if any, as negative amounts.)**

Q19. The Henna Co. manufactures and sells two products, T and O. It manufactures these products in separate factories and markets them through various channels. You have no cost sharing. That year, the company sold 44,000 units of each product. Below are the sales and costs for each product.

Product T | product OR | ||||||||

offer | p.s | 774.400 | p.s | 774.400 | |||||

Variable costs | 464.640 | 154.880 | |||||||

contribution margin | 309.760 | 619.520 | |||||||

fixed costs | 187.760 | 497.520 | |||||||

pre-tax income | 122.000 | 122.000 | |||||||

Income tax (32% rate) | 39.040 | 39.040 | |||||||

net income | p.s | 82.960 | p.s | 82.960 | |||||

**3.**Suppose the company expects sales of each product to increase to 58,000 units over the next year without changing the selling price per unit. Prepare expected financial results for the coming year by following the Contribution Margin Income Statement format shown with columns for each of the two products (assume a 32% tax rate).**(Rounding "by unit" responds to 2 decimal places.)**

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