Assignment: Managerial Accounting
Part I: Fixed and Variable Cost
Stuart Manufacturing produces metal picture frames. The company's income statements for the last two years are given below:
Last year This year
Units sold ................................................... 50,000 70,000
Sales ........................................................... $800,000 $1,120,000
Cost of goods sold ..................................... 550,000 710,000
Gross margin ............................................. 250,000 410,000
Selling and administrative expense ........... 150,000 190,000
Net operating income ................................ $100,000 $ 220,000
The company has no beginning or ending inventories.
Required:
a) Estimate the company's total variable cost per unit and its total fixed costs per year. (Remember that this is a manufacturing firm.)
b) Compute the company's contribution margin for this year.
Part II: Cost-Volume-Profit Analysis
Belli-Pitt, Inc, produces a single product. The results of the company's operations for a typical month are summarized in contribution format as follows:
Sales ................................... $540,000
Variable expenses .............. 360,000
Contribution margin .......... 180,000
Fixed expenses .................. 120,000
Net operating income ........ $ 60,000
The company produced and sold 120,000 kilograms of product during the month. There were no beginning or ending inventories.
Required:
A) Given the present situation, compute
a) The break-even sales in kilograms.
b) The break-even sales in dollars.
c) The sales in kilograms that would be required to produce net operating income of $90,000.
d) The margin of safety in dollars.
B) An important part of processing is performed by a machine that is currently being leased for $20,000 per month. Belli-Pitt has been offered an arrangement whereby it would pay $0.10 royalty per kilogram processed by the machine rather than the monthly lease.
a) Should the company choose the lease or the royalty plan?
b) Under the royalty plan compute break-even point in kilograms.
c) Under the royalty plan compute break-even point in dollars.
d) Under the royalty plan determine the sales in kilograms that would be required to produce net operating income of $90,000.
Format your assignment according to the give formatting requirements:
a) The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
b) The response also includes a cover page containing the title of the assignment, the course title, the student's name, and the date. The cover page is not included in the required page length.
c) Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.