Can someone please help me solve this problem. it is the same I posted before Yo
ID: 2475352 • Letter: C
Question
Can someone please help me solve this problem. it is the same I posted before
You are the COO of KILLER Manufacturing Company. Your research & development department has created the ultimate MOUSE TRAP. You have called a meeting of your major department heads to discuss the future potential of this product for 2016. In attendance: Sales VP Donia, VP of Research Leia, Production VP Galen, IT VP Michael, CFO Scott
1) Donia, your sales VP, claims we can sell 20,000 units at an average price of $30.00. She also informs us that she estimates variable selling costs to be 10% of sales & fixed selling costs to be $25,000.
2) Leia, our VP of Research, that the development cost for the MOUSE TRAP was $75,000
3) Galen, our esteemed Production VP, gives us the following costs to produce one unit: Direct Material $2.50 per unit Direct Labor $7.50 per unit Variable Overhead $0.50 per unit Fixed Overhead $25,000.00
4) Michael, our IT expert, tells us that the cost of additional IT development for this project will be $35,000 fixed
5) You direct Scott, our CFO of fame, to come with a budget for this product. Scott announces that General & administrative cos of $45,000 should also be charged (GA costs)
REQUIREMENTS: 1) Prepare a budget in good form for this product (show GP %, Net income %) 2) Prepare a contribute margin statement for this product (show CM %, net income %) in good form 3) Determine the breakeven point IN UNITS for THE ULTIMATE MOUSE TRAP
Explanation / Answer
1. Budget
Estimated sale
20,000 units
Sale estimated(20,000 units at an Average price of $30
600,000
Less:
Direct Material
50,000
Direct labor
150,000
Variable Overhead
10,000
Variable selling cost
60,000
Fixed Overhead
25,000
Gross Profit
305,000
Contribution Margin in %
0.5083 or 50.83%
Less:
Fixed selling Costs
25,000
Additional IT costs
35,000
General and administrative costs
45,000
Development costs
75,000
Net Income/profit
125,000
Net Income in %
0.2083 or 20.83%
2. contribution Margin Statement
Estimated sale
20,000 units
Sale estimated(20,000 units at an Average price of $30
600,000
Less:
Direct Material
50,000
Direct labor
150,000
Variable Overhead
10,000
Variable selling cost
60,000
Contribution margin
390,000
Contribution Margin in %
0.65 or 65%
Less:
Fixed Overhead
25,000
Fixed selling Costs
25,000
Additional IT costs
35,000
General and administrative costs
45,000
Development costs
75,000
Net Income/profit
185,000
Net Income in %
0.3083 or 30.83%
3. Breakeven point in Units:
Breakeven point in units = Fixed costs / Contribution margin per unit
Fixed costs = $25,000 + $25,000 + $35,000 + $45,000 + $75,000
Fixed cost = $205,000
Contribution Margin per unit = Contribution / Estimated no of units sold
Contribution Margin per unit = $390,000 / 20,000 units
Contribution Margin per unit = $19.5 per unit
Breakeven point in units = $205,000 + $19.5 per unit
Breakeven point in units = 10,513 units
1. Budget
Estimated sale
20,000 units
Sale estimated(20,000 units at an Average price of $30
600,000
Less:
Direct Material
50,000
Direct labor
150,000
Variable Overhead
10,000
Variable selling cost
60,000
Fixed Overhead
25,000
Gross Profit
305,000
Contribution Margin in %
0.5083 or 50.83%
Less:
Fixed selling Costs
25,000
Additional IT costs
35,000
General and administrative costs
45,000
Development costs
75,000
Net Income/profit
125,000
Net Income in %
0.2083 or 20.83%