Reference no: EM131988126

Problem 1: The Peace Company has the following functional income statement for the prior month.

Sales ($50 * 100,000 units) $5,000,000

Cost of goods sold

Direct materials $1,200,000

Direct labor $950,000

Variable factory overhead $600,000

Fixed factory overhead $850,000 $3,600,000

Gross profit $1,400,000

Selling and administrative expense

Variable

Fixed

Operating income

There were no beginning and ending inventories.

Required:

a. Calculate the contribution margin per unit.

b. Calculate the contribution margin ratio.

c. What is the break-even point in units?

d. What is the amount of sales in dollars needed to obtain a before-tax profit of $40,000?

Problem 2: Suzy Manufacturing has estimated monthly sales of 18,000 units for $48 per unit. Variable costs include manufacturing costs of $27 and distribution costs of $9. Fixed costs are $60,000 per month.

Required -

Determine each of the following values.

a. Unit contribution margin

b. Monthly break-even unit sales volume

c. Before-tax monthly profit

d. Monthly margin of safety in units