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Ch 19 Wiley Kimmel Homework Quiz

Ch 19 Wiley Kimmel Homework Quiz

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05/11/2013

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Determine the missing amounts.
(Round all answers to 0 decimal places, e.g. 23.)

Unit Selling PriceUnit Variable CostsContributionMargin per UnitContributionMargin Ratio1.
\$292 \$188(a)\$ 104(b)36 %
2.
\$546(c)\$ 316\$230(d)42 %
3.
(e)\$ 1180(f)\$ 826\$354 30%
1.
(a)
\$104
= (\$292 - \$188) (b)
36%
(\$104 ÷ \$292)
2.
(c)
\$316
= (\$546 -\$230) (d)
42%
(\$230 ÷ \$546)
3.
(e)
\$1,180
= (\$354 ÷ 30%) (f)
\$826
(\$1,180- \$354)
Family Furniture Co. consists of two divisions, Bedroom Division and Dining Room Division. The results of operations for the most recent quarter are:
Bedroom DivisionDining RoomDivisionTotal
Sales\$507,400 \$751,500 \$1,258,900Variable costs242,100 443,400 685,500 Contribution margin\$265,300 \$308,100 \$573,400
(a)
Determine the company's sales mix.
(Round answers to 2 decimal places, e.g. 0.25.)
Bedroom Division.40Dinning Room Division.60
(b)
Determine the company's weighted average contribution margin ratio.
(Round to 2 decimal places, e.g.0.25.)

.46
(a)
Sales Mix Bedroom Division [\$507,400 ÷ (\$507,400 + \$751,500)] =
0.40
Dining Room Division [\$751,500 ÷ (\$507,400 + \$751,500)] =
0.60(b)
Weighted-average contribution margin ratio=\$573,400=
0.46
\$1,258,900ORContribution Margin RatioBedroom Division (\$265,300 ÷ \$507,400) = 0.52Dining Room Division (\$308,100 ÷ \$751,500) = 0.41Weighted-average contribution margin ratio = (0.52 × 0.40) + (0.41 × 0.60) =
0.45
Both answers are correct. If there is a difference in the two amounts, it is due to rounding.Grass King manufactures lawnmowers, weed-trimmers, and chainsaws. Its sales mix and contribution margin perunit are as follows.
Sales MixContribution Marginper Unit
Lawnmowers30%\$50Weed-trimmers50%\$22Chainsaws20%\$45Grass King has fixed costs of \$5,974,850.Compute the number of units of each product that Grass King must sell in order to break even under this productmix.Lawnmowers

51213 unitsWeed-trimmers85355 unitsChainsaws34142 units
Sales MixPercentageContributionMargin Per UnitWeighted-AverageContribution Margin

Lawnmowers30%\$50\$15.00Weed-trimmers50%\$2211.00Chainsaws20%\$459.00\$35.00Total break-even = \$5,974,850 ÷ \$35.00 = 170,710 units
Sales UnitsSales MixPercentageTotalBreakevenSales UnitsSales Units Needed Per Product
Lawnmowers30%×170,710=
51,213
unitsWeed-trimmers50%×170,710=
85,355
unitsChainsaws20%×170,710=
34,142
units170,710 unitsAn investment banker is analyzing two companies that specialize in the production and sale of candied apples. Old-Fashion Apples uses a labor-intensive approach, and Mech-Apple uses a mechanized system. CVP incomestatements for the two companies are shown below.
Old Fashion ApplesMech-Apple
Sales\$400,000 \$400,000Variable costs320,000 160,000 Contribution margin80,000 240,000Fixed costs20,000 180,000 Net income\$60,000 \$60,000 The investment banker is interested in acquiring one of these companies. However, she is concerned about theimpact that each company's cost structure might have on its profitability.Calculate each company's degree of operating leverage.
Old-Fashion Apples1.33Mech-Apple4Determine which company's cost structure makes it more sensitive to changes in sales volume.Mech-Apple