Net operating income:An income is the difference between the revenue and expenses of a company. A net operating income is an income from the usual operations of a company.
Target Profit Analysis:It is an analysis of how much unit sales or dollar sales value a company must be attain to realize the target profit estimated by the company.
Contribution margin:The difference between the sales revenue and the variable expenses is called a contribution margin.
Break-Even Point:A break-even point is the point where a company is neither making profit nor incurring any loss.
1. (a)Contribution margin ratio and break-even point in balls, and (b) the degree of operating leverage.
2. Contribution margin ratio and break-even point in balls.
3. Required sales in balls to attain net operating income of $90,000.
4. Selling price per unit to be increase.
5. Contribution margin ratio and break-even point in balls.
6. a) Required sales in balls to attain a net operating income of $90,000.
b) Preparing contribution format income statement and computation of degree of operating leverage.
c) Recommendation of constructing the new plant.
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Introduction To Managerial Accounting
- 1 Lazy Days Inc. (LDI), sells hammocks. Revenue and cost information is given below: Sales Price 3. TL 30 Unit Variable Cost 20 Annual Fixed Operating Expenses 47,500 Required: a) Determine the sales volume in units and TL amount that would be required to attain a TL 12,500 profit. Verify your answer by preparing an income statement using the contribution margin format. b) LDI is considering the implementation of a quality improvement program. The program will require a TL 2.50 increase in the variable cost per unit. To inform its customers of the quality improvements, the company plans to spend an additional TL 5,000 for advertising. Assuming that the improvement program will increase sales to a level that is 1,500 units above the amount computed in requirement a, should LDI proceed with plans to improve product quality? Support your answer by preparing a budgeted income statement. c) Determine the new break-even point volume of units and sales in TL as well as the margin of safety…arrow_forwardMiller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The standard cost for one pool is as follows: Standard Quantity or Hours 1.40 kilograms Standard Cost $5.60 0.90 hours 0.30 machine-hours Direct materials Direct labour Variable manufacturing overhead Total standard cost Sales (15,200 pools) Less: Variable expenses: Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Less: Fixed expenses: Manufacturing overhead Selling and administrative The plant has been experiencing problems for some time, as is shown by its June income statement when it made and sold 15,200 pools; the normal volume is 15,350 pools per month. Fixed costs are allocated using machine-hours. Total fixed expenses Net income Material price variance Material quantity variance Labour rate variance Labour efficiency variance Variable overhead spending variance Variable overhead efficiency variance *Contains direct materials, direct labour, and…arrow_forwardOutsourcing Dough, Re, Mi Inc. sells many different types of cookie dough. The company is deciding whether to continue making its own dough or to outsource. If the company outsources, they will eliminate all of the variable overhead and 25% of the fixed manufacturing overhead, but will incur shipping costs. Use the information below to determine whether Dough, Re, Mi Inc. should outsource or not. Data Units Per unit Relevant? Sales price per unit 5,300 $ 106.00 No Direct materials per unit 23.00 ? Direct labor per unit 18.00 ? Variable manufacturing overhead per unit 14.00 Yes Fixed…arrow_forward
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