Reference no: EM133064779

Question 1 - Gross profit calculations. Net sales for the year were $450,000 and cost of goods sold was $297,000 for the company's existing products. A new product is presently under development and has an expected selling price of not more than $75 per unit in order to remain competitive with similar products in the marketplace.

Calculate gross profit and gross profit ratio for the year.

What is the maximum cost per unit that can be incurred to manufacture the new product so that the product can be priced competitively and will not result in a reduction to the company's gross profit ratio?

Question 2 - Calculate earned revenues. Kirkland Theater sells season tickets for six events at a price of $180. In pricing the tickets, the planners assigned the leadoff event a value of $45 because the program was an expensive symphony orchestra. The last five events were priced equally; 1,500 season tickets were sold for the season.

Calculate the theater's earned revenue after the first three events have been presented.

Question 3 - Using cost behavior patterns. MFG Company experiences the following cost behavior patterns each week:

Fixed costs: supervisor's salary $1,000; factory rent $2,500

Mixed costs: utilities $1,500 + $5.25 per unit

Variable costs per unit: manufacturing labor wages $20; supplies used in production $8.50; packaging cost $2.25, warranty cost $4

Compute total costs to be incurred for a week with 2,750 units of activity.

Question 4 - CVP Analysis. Current operating income for Bay Area Cycles Co. is $70,000. Selling price per unit is $100; the contribution margin ratio is 35%, and fixed expense is $280,000.

First - calculate Bay Area Cycle's per unit variable expense and contribution margin. How many units are currently being sold? How many additional unit sales would be necessary to achieve operating income of $105,000.

Second - Calculate Bay Area Cycle's break-even point in units and sales dollars.