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Exercise 5-12 Computing sales to achieve target income LO C2
Blanchard Company manufactures a single product that sells for $250 per unit and whose total variable costs are $200 per unit.
The company’s annual fixed costs are $770,000. Management targets an annual pretax income of $1,250,000.
Assume that fixed costs remain at $770,000.
 

   
Exercise 5-11 Income reporting and break-even analysis LO P2
Blanchard Company manufactures a single product that sells for $120 per unit and whose total variable costs are $84 per unit.
The company’s annual fixed costs are $529,200.
 
(1) Prepare a contribution margin income statement for Blanchard Company at the break-even point.
 
(2) Assume the company’s fixed costs increase by $132,000. What amount of sales (in dollars) is needed to break even?
 

   
Exercise 5-21 Predicting unit and dollar sales LO C2
Nombre Company management predicts $1,320,000 of variable costs, $1,686,000 of fixed costs, and a pretax income of $294,000 in the next period.
Management also predicts that the contribution margin per unit will be $33.
 

   
Problem 5-4A Break-even analysis; income targeting and forecasting LO C2, P2, A1
[The following information applies to the questions displayed below.]


Astro Co. sold 20,800 units of its only product and incurred a $56,672 loss (ignoring taxes) for the current year as shown here.
During a planning session for year 2018’s activities, the production manager notes that variable costs can be reduced 50% by installing a
machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $158,000.
The maximum output capacity of the company is 40,000 units per year.
 

ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2017
Sales		$	796,640
Variable costs			637,312
Contribution margin			159,328
Fixed costs			216,000
Net loss		$	(56,672	)

 
Problem 5-4A Part 1
Required:
Compute the break-even point in dollar sales for year 2017.
(Round your answers to 2 decimal places.)
 

 
2 2. Compute the predicted break-even point in dollar sales for year 2018 assuming the machine is installed and there is no change in the unit selling price.
(Round your answers to 2 decimal places.)
 

 
Prepare a forecasted contribution margin income statement for 2018 that shows the expected results with the machine installed.
Assume that the unit selling price and the number of units sold will not change, and no income taxes will be due.
(Do not round intermediate calculations. Round your answers to the nearest whole dollar.)

 
Compute the sales level required in both dollars and units to earn $280,000 of target pretax income in 2018 with the
machine installed and no change in unit sales price.
(Do not round intermediate calculations. Round your answers to 2 decimal places. Round "Contribution margin ratio"
to nearest whole percentage)

Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4.
Assume no income taxes will be due.
(Do not round intermediate calculations. Round "per unit answers" to 2 decimal places.)
Blanchard Company manufactures a single product that sells for $175 per unit and whose total variable costs are $140 per unit. The company’s annual fixed costs are $514,500.

Q2. Blanchard Company manufactures a single product that sells for $220 per unit and whose total variable costs are $176 per unit.
The company’s annual fixed costs are $664,400.
(1) Prepare a contribution margin income statement for Blanchard Company showing sales, variable costs, and fixed costs at the break-even point.
(2) Assume the company’s fixed costs increase by $136,000. What amount of sales (in dollars) is needed to break even?

Blanchard Company manufactures a single product that sells for $136 per unit and whose total variable costs are $102 per unit.
The company’s annual fixed costs are $496,400. Management targets an annual pretax income of $850,000. Assume that fixed costs remain at $496,400.

Q4. Blanchard Company manufactures a single product that sells for $120 per unit and whose total variable costs are $90 per unit.
The company’s annual fixed costs are $624,000. The sales manager predicts that annual sales of the company’s product will soon reach
39,400 units and its price will increase to $194 per unit. According to the production manager, variable costs are expected to increase to
$134 per unit, but fixed costs will remain at $624,000. The income tax rate is 25%. What amounts of pretax and after-tax income can the
company expect to earn from these predicted changes?
Prepare a forecasted contribution margin income statement.
Bloom Company management predicts that it will incur fixed costs of $254,000 and earn pretax income of $411,600 in the next period.
Its expected contribution margin ratio is 64%.

Required:
1. Compute the amount of total dollar sales.
2. Compute the amount of total variable costs.
Harrison Co. expects to sell 150,000 units of its product next year, which would generate total sales of $12,000,000.
Management predicts that pretax net income for next year will be $1,200,000 and that the contribution margin per unit will be $30.
Complete the below table to calculate the next year’s total expected variable costs and fixed costs.
Hudson Co. reports the contribution margin income statement for 2019.

HUDSON CO.
Contribution Margin Income Statement
For Year Ended December 31, 2019
Sales (10,100 units at $300 each)	$	3,030,000
Variable costs (10,100 units at $240 each)		2,424,000
Contribution margin		606,000
Fixed costs		468,000
Pretax income	$	138,000

1. Compute Hudson Co.’s break-even point in units.
2. Compute Hudson Co.’s break-even point in sales dollars.

 

Homework  1.1 1.2  2.1 2.2  3.1 3.2  4.1 4.2 5.1 5.2  6.1 6.2  7.1  7.2  8.1  8.2  9.1   9.2  10.1  10.2  11.1  11.2  12.1 12.2  13.1  13.2  14.1  14.2  15.1   15.2
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