Question

Check my work Check My Work button is now enabledItem 6Item 6 10 points Walton Manufacturing Company reported the following data regarding a product it manufactures and sells. The sales price is $42. Variable costs Manufacturing $ 14 per unit Selling 6 per unit Fixed costs Manufacturing $ 162,000 per year Selling and administrative $ 132,800 per year Required Use the per-unit contribution margin approach to determine the break-even point in units and dollars. Use the per-unit contribution margin approach to determine the level of sales in units and dollars required to obtain a profit of $132,000. Suppose that variable selling costs could be eliminated by employing a salaried sales force. If the company could sell 20,300 units, how much could it pay in salaries for salespeople and still have a profit of $132,000

Answer 1

Answer and Explanation:

According to the scenario, computation of the given data are as follow:-

A) Total Variable Cost = Variable Cost Manufacturing + Variable Cost Selling Per Unit

= $14+ $6

= $20

Contribution Margin (CM)= Sales - Total Variable Cost

= $42 - $20

= $22

Contribution Margin Ratio (CMR) = Contribution Margin ÷ Sales × 100

= $22 ÷ $42 × 100

= 52.38%

Total Fixed Cost = Fixed Manufacturing Cost + Fixed Selling And Administrative Cost

= $162,000 + $132,800

= $294,800

Break Even in Units = Total Fixed Cost ÷ Contribution Margin

= $294,800 ÷ $22

= $13,400

Break Even in Dollars = Total Fixed Cost ÷ Contribution Margin Ratio

= $294,800 ÷ 52.38%

= $562,810.23

B).

Particular Amount ($)

Desired Profit 132,000

Add: Total Fixed Cost 294,800

Total Amount 426,800

Break Even in Units (Total Amount ÷ CM) = $426800 ÷ $22 = 19,400

Break Even in Dollars(Total Amount ÷ CMR)

= $426800 ÷ 52.38%

= $814,814.81

C). Sales = Sale Unit × Selling Price Per Unit

= 20,300 × $42

= $852,600

Variable Cost = Sale Units × Variable Manufacturing Cost Per Unit

= 20,300 × $14

= $284,200

Fixed Cost = Sales - Variable Cost - Profit

= $852,600 - $284,200 - $132,000

= $436,400

Salaries for Sales People = Total Fixed Cost-Fixed Cost Manufacturing -Selling And Administrative Fixed Cost

= $436,400 - $162,000 - $132,800

= $141,600