Liberty ACCT 212 Chapter 5 Homework Answers Complete Solutions
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Question 1
Blanchard Company manufactures a single product that sells for $160 per unit and whose total variable costs are $112 per unit. The company’s annual fixed costs are $734,400.
(a) Compute the company’s contribution margin per unit.
(b) Compute the company’s contribution margin ratio.
(c) Compute the company’s break-even point in units.
(d) Compute the company’s break-even point in dollars of sales.
Question 2
Blanchard Company manufactures a single product that sells for $240 per unit and whose total variable costs are $180 per unit. The company’s annual fixed costs are $954,000.
(1) Prepare a contribution margin income statement for Blanchard Company showing sales, variable costs, and fixed costs at the break-even point.
(2) Assume the company’s fixed costs increase by $144,000. What amount of sales (in dollars) is needed to break even?
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Question 3
Blanchard Company manufactures a single product that sells for $240 per unit and whose total variable costs are $180 per unit. The company’s annual fixed costs are $954,000. Management targets an annual pretax income of $1,500,000. Assume that fixed costs remain at $954,000.
(1) Compute the unit sales to earn the target income.
(2) Compute the dollar sales to earn the target income.
Question 4
Blanchard Company manufactures a single product that sells for $160 per unit and whose total variable costs are $128 per unit. The company’s annual fixed costs are $625,000. The sales manager predicts that annual sales of the company’s product will soon reach 39,500 units and its price will increase to $195 per unit. According to the production manager, variable costs are expected to increase to $135 per unit, but fixed costs will remain at $625,000. The income tax rate is 20%. What amounts of pretax and after-tax income can the company expect to earn from these predicted changes?
Question 5
Bloom Company management predicts that it will incur fixed costs of $267,000 and earn pretax income of $353,100 in the next period. Its expected contribution margin ratio is 53%.
1. Compute the amount of total dollar sales.
2. Compute the amount of total variable costs.
Question 6
Harrison Co. expects to sell 220,000 units of its product next year, which would generate total sales of $19,140,000. Management predicts that pretax net income for next year will be $1,270,000 and that the contribution margin per unit will be $23.
Complete the below table to calculate the next year’s total expected variable costs and fixed costs.
Question 7
1. Compute Hudson Co.’s break-even point in units.
2. Compute Hudson Co.’s break-even point in sales dollars.
Question 8
1. Assume Hudson Co. has a target pretax income of $162,000 for 2020. What amount of sales (in dollars) is needed to produce this target income?
2. If Hudson achieves its target pretax income for 2020, what is its margin of safety (in percent)? (Round your answer to 1 decimal place.)
Question 9
Assume the company is considering investing in a new machine that will increase its fixed costs by $39,500 per year and decrease its variable costs by $9 per unit. Prepare a forecasted contribution margin income statement for 2020 assuming the company purchases this machine.
