Problem 1: Crimson manufactures decorative iron railings. In preparing for next year's operations, management has developed the following estimates:
Total Per Unit
Sales (20,000 units) $1,000,000 $50.00
Direct materials $200,000 $10.00
Direct labor $50,000 $2.50
Manufacturing overhead:
Variable $70,000 $3.50
Fixed $80,000 $4.00
Selling & administrative
Variable $100,000 $5.00
Fixed $30,000 $1.50
Required:
Compute the following items:
A) Unit contribution margin.
B) Contribution margin ratio.
C) Break-even in dollar sales.
D) If the sales volume increases by 20% with no change in total fixed expenses, what will be the change in net operating income?
Problem 2: For 2012, Taffy Company has an acid-test ratio of 1.5 and a current ratio of 2.5. Current assets equal $200,000, of which $10,000 is prepaid expenses. The company's current assets consist of cash, marketable securities, accounts receivable, prepaid expenses, and inventory.
Required: Calculate the inventory balance on Taffy's balance sheet.