Problem 3
(a) JORGE COMPANY
CVP Income Statement (Estimated)
For the Year Ending December 31, 2014
Sales................................................................................. $1,800,000
Variable costs
Direct materials………........................... 380,000
Direct labor……..................................... 70,000
Manufacturing overhead........................ 380,000
Selling expenses.................................... 70,000
Administrative expenses........................ 20,000
Total variable costs....................................... 1,260,000
Contribution margin........................................................... 540,000
Fixed costs
Manufacturing overhead......................... 280,000
Selling expenses..................................... 65,000
Administrative expenses......................... 60,000
Total fixed costs............................................. 405,000
Net income......................................................................... $135,000
$ 1,800,000∈sales
(b) Total unit = =3,600,000 total units projected
$ 0.5 per unit
$ 540,000
Unit Contribution Margin= =$ 0.15
3,600,000units
$ 405,000
Break−even point∈units= =2,700,000units
$ 0,15
Break−even point∈dollars=2,700,000 × $ 0.5=$ 1,350,000
(c)
Contribution Margin Ratio=Total ¿ costs ¿
Break−even point ∈dollars
$ 405,000
¿>Contribution Margin Ratio= =30 %
$ 1,350,000
Margin of safety ∈dollars Actual sales−Break even sales
Margin of Safety Ratio= =
Actual sales Actual sales
$ 1,800,000−1,350,000
¿> Margin of Safety Ratio= =25 %
$ 1,800,000
(d)
Required sales∈dollars=Total ¿ cost +Target net income ¿
Contribution marginratio
$ 405,000+ $ 180,000
¿> Required sales∈dollars= =$ 1,950,000
30 %
Problem 4
Cook Farm Supply Company
Sales budget
For the first six months ending June 30th, 2020
Quarter 1 Quarter 2 Total
Expected unit sales 40,000 56,000
Unit selling price $ 60 $ 60
Total sales $ 2,400,000 $ 3,360,000 $ 5,760,000
Cook Farm Supply Company
Production Budget
For the first six months ending June 30th, 2020
Quarter 1 Quarter 2 Total
Expected unit sales 40,000 56,000
Add: Desired ending finished goods units 15,000 18,000
Total required units 55,000 74,000
Less: Beginning finished goods units 8,000 15,000
Required production units 47,000 59,000 106,000
Cook Farm Supply Company
Direct Materials Budget
For the first six months ending June 30th, 2020
Quarter 1 Quarter 2 Total
Budgeted production 47,000 59,000
Direct materials per unit 4 4
Total pounds needed for production 188,000 236,000
Add: Desired ending direct materials 10,000 13,000
Total materials required 198,000 249,000
Less: Beginning direct materials 9,000 10,000
Direct materials purchase 189,000 239,000
Cost per pound $ 3.80 $ 3.80
Total costs of direct materials
$ 718,200 $ 908,200 $ 1,626,400
purchase
Cook Farm Supply Company
Direct Labor Budget
For the first six months ending June 30th, 2020
Quarter 1 Quarter 2 Total
Units to be produced 47,000 59,000
Direct labour time (hours) per unit 0.25 0.25
Total required direct labour hours 11,750 14,750
Direct labour cost per hour 16 16
Total direct labour cost $ 188,000 $ 236,000 $ 424,000
Cook Farm Supply Company
Selling and Administrative Expense Budget
For the first six months ending June 30th, 2020
Quarter 1 Quarter 2 Total
Budgeted sales in 40,000 56,000
units
Variable $ 360,000 $ 504,000
Fixed $ 175,000 $ 175,000
Total $ 535,000 $ 679,000 $ 1,214,000
Cook Farm Supply Company
Budgeted Income Statement
For the first six months ending June 30th, 2020
Sales $ 5,760,000
Cost of goods sold $ 3,187,200
Gross profit $ 2,572,800
Selling and administrative expenses $ 1,214,000
Income from operation $ 1,358,800
Interest expense $ 100,000
Income before income tax $ 1,258,800
Income tax expense $ 377,640
Net income $ 881,160
Cook Farm Supply Company
Manufacturing Overhead Budget (Gumm)
For the first six months ending June 30th, 2020
Quantity Unit cost Total
Direct materials 4 (pounds) $ 3.80 $ 15.20
Direct labor 1/4 (hour) $ 1.50 $ 4.00
Manufacturing overhead (1.25 x direct labor cost) $5.00
Total $ 24.20
Problem 5
(a)
Deleon Inc.
Sales Budget
For the year ending December 31, 2020
JB 50 JB 60 Total
Expected unit sales 400,000 200,000
Unit selling price $ 20 $ 25
Total sales $ 8,000,000 $ 5,000,000 $ 13,000,000
