Assume that you are part of the accounting team for logan

Reference no: EM13587379

Assume that you are part of the accounting team for Logan Digital. The company currently expects to sell 650 units for total revenue of $20,250 each month. Logan Digital estimates direct materials costs of $3,150, direct labor costs of $4,200, variable overhead costs of $2,100, and variable selling and administrative costs of $1,050. Fixed costs of $6,750 are also expected, which includes fixed overhead and selling and administrative costs. Using this information, complete a contribution margin income statement .

Logan Digital is examining cost behavior patterns. Your recommendation is to first determine the break-even point in units. First, calculate the contribution margin (CM) per unit (rounded to the nearest dollar).

Next, complete the formula below to determine the break-even units.

Total Fixed Costs / Contribution Margin per Unit = Units

A profit-volume graph helps managers to visualize the relationship between profits and units sold. The data for Logan Digital has been used to construct the profit-volume graph below. The purple points (diamond symbols) plot the profit line. The operating loss is the shaded area bordered by the red points (cross symbols). The operating profit is the area bounded by the green points (triangle symbols). Graph the correct profit-value graph.

APPLY THE CONCEPTS: Effect of Changes to Sales Price, Variable Costs and Fixed Costs

Now consider each of the following scenarios for Logan Digital. Calculate the contribution margin (CM) per unit, rounded to nearest dollar, and the new break-even point in units, rounded to the nearest whole unit, for each scenario separately.

Scenario 1	Scenario 2	Scenario 3
Logan will dispose of a machine in the factory. The depreciation on that equipment is $500 per month.	After some extensive market research, Logan has determined that a sales price increase of $2 per unit will not affect the sales volume and will be effective immediately.	Logan has been experiencing quality problems with a materials supplier. Changing suppliers will improve the quality of the product but will cause direct materials costs to increase by $1 per unit.

Reference no: EM13587379

Questions Cloud

Elaine provides more than half of the support for her son : elaine provides more than half of the support for her son james who does not live with her. james is 26 and is a

Find equations for rtheta periodtheta vtheta tensiontheta : consider a conical pendulum that is a ball of mass m at the end of a string of length li moving in a horizontal circle

Over time the production staff has noticed that products : cain components manufactures and distributes various plumbing products used in homes and other buildings. over time the

Suppose that angles measure 2x and 4x6 are supplementary : suppose that angles measure 2x and 4x6 are supplementary. what are the measures of the angles? in

Assume that you are part of the accounting team for logan : assume that you are part of the accounting team for logan digital. the company currently expects to sell 650 units for

At t 0 a force of the form f bt2e-lambdat is applied in : 1. consider a conical pendulum that is a ball of mass m at the end of a string of length li moving in a horizontal

The following details are available in respect of a product : the following details are available in respect of a product produced in a factory product s having standard mix of 250

The combustion of propane illustrated by the following : the combustion of propane illustrated by the following reaction releases 2428 kj per mole of reaction. a sample of

Calculate material mix variance using 1 original standard : calculate material mix variance using 1 original standard mix ratio 2 revised standard mix ratiofor material a whose

User Account

All Pages