
Chapter 9, Problem 44P
Bookmark
Show all steps:
ON

Home
Study tools
My courses


My books
My folder
Career
Life

Search
Find solutions for your homework
home / study / business / accounting theory / accounting theory solutions manuals / cost accounting / 9th edition / chapter 9 / problem 44p
Cost Accounting (9th Edition)
Post a question
Answers from our experts for your tough
homework questions
Enter question
Problem
Continue to post
Nature’s Own makes three types of wood flooring: Oak, Hickory, and Cherry. The company’s tax
rate is 40 percent. The following costs are expected for 2014:
0 questions remaining
My Textbook Solutions
Cost
Accounting
Vector
Mechanics...
Traffic and
Highway...
9th Edition
10th Edition
5th Edition
View all solutions
a. Calculate the break-even point for 2014. (Round to the next highest whole unit.)
b. How many square yards of each product are expected to be sold at the break-even point?
(Round CM% to the nearest tenth of a percent.)
c. If the company wants to earn pre-tax profit of $800,000, how many square yards of each type
of flooring would it need to sell? How much total revenue would be required? (Round to the next
highest whole unit.)
d. If the company wants to earn an after-tax profit of $680,000, determine the revenue needed
using the contribution margin percentage approach. (Round CM% to the nearest tenth of a
percent and amounts to the nearest whole dollar.)
e. If the company achieves the revenue determined in (d), what is the margin of safety (1) in
dollars and (2) as a percentage? (Round to the nearest tenth of a percent.)
Step-by-step solution
Step 1 of 23
It is given that NO Company makes three types of products O, H and C. The company’s tax rate
is 40 percent. The selling price of the pre-square yard for O is $32.80, H is $16.00, and C is
$50.00.
a)
Now, calculate total variable costs.
Particulars
O ($)
Direct material
10.40 6.50
17.60
Direct labor
2.60
0.80
12.80
Variable overhead
2
0.30
3.50
Variable selling
1
0.50
4.00
0.20
0.60
Variable administrative 0.40
Total variable cost
H ($) C ($)
17.40 8.30
38.50
Comments (2)
Step 2 of 23
Now, calculate the contribution margin of the three products.
Comment
Step 3 of 23
Particulars
O ($)
H ($) C ($)
Sales
32.80 16
50
Total variable cost
17.40 8.30
38.50
Contribution margin
15.40 7.70
11.50
Comments (1)
Step 4 of 23
Now, calculate sales ratio of the company.
Comment
Step 5 of 23
Product Sales in yards % of sales Sales per unit
O
9,000
10.34
3
H
72,000
82.76
24
C
6,000
6.90
2
Total
87,000
100.00
29
Note:
The sales per unit are calculated by dividing sales in yards of each product by $3,000.
Comments (3)
Step 6 of 23
Now, calculate contribution margin of the company.
……
(1)
Hence, the contribution margin of the company is
.
Comment
Step 7 of 23
Now, calculate total fixed costs of the company.
…… (2)
Comment
Step 8 of 23
Hence, the total fixed costs of the company are
.
Comment
Step 9 of 23
Now, calculate breakeven point in units.
…… (3)
Hence, the breakeven point of the company is
.
Comment
Step 10 of 23
b)
It is calculated that sales per unit of the products O is $3, H is $24, and C is $2 and selling prices
are $32.80, $16.00, and $50.00 respectively.
Now, calculate the sales margin of the company.
…… (4)

Chapter 9, Problem 44P
Bookmark
Show all steps:

Hence, the sales margin of the company is
Home
Study tools

.
My courses

My books
My folder
Career
Comments (1)
ON
Step 11 of 23
Now, calculate contribution margin ratio of the company.
…… (5)
Hence, the contribution margin ratio of the company is
.
Comment
Step 12 of 23
Now, calculate breakeven point of the company in dollars.
……. (6)
Hence, the breakeven point of the company is
.
Comment
Step 13 of 23
c)
It is calculated that total fixed cost of the company is $1,200,000 (refer to Equation (2)),
contribution margin per unit is $254(refer to Equation (1)), and pretax profit of the company is
$800,000.
Now, calculate the number of units required.
…… (7)
Hence, number of units required to earn pretax profit is
.
Comment
Step 14 of 23
Now, calculate the total revenue of the company.
Comment
Step 15 of 23
……
(8)
Hence, the revenue of the company is
.
Comment
Step 16 of 23
d)
It is calculated sales margin per bag is $582.40 (refer to Equation (4)), contribution margin is
$254 (refer to Equation (1)), and after tax profit is $680,000.
Now, calculate contribution margin ratio.
…… (9)
Hence, contribution margin ratio is
.
Comment
Step 17 of 23
Now, calculate the pretax profit.
Comment
Step 18 of 23
…… (10)
Hence, the pretax profit of the company is
.
Comment
Step 19 of 23
Now, calculate the revenue of the company.
…… (11)
Hence, the revenue of the company is
.
Comment
Step 20 of 23
e)
It is calculated that contribution margin is 0.436 (refer to Equation (9)), fixed cost is $1,200,000
(refer to Equation (2)), and revenue is $5,351,681 (refer to Equation (11)).
Now, calculate breakeven point in dollars.
…… (12)
Hence, the breakeven point of the company is
.
Comment
Step 21 of 23
Now, calculate margin of safety in dollars.
…… (13)
Hence, margin of safety in dollars is
.
Comment
Step 22 of 23
Now, calculate margin of safety in percentage.
Comment
Step 23 of 23
…… (14)
Hence, the margin of safety in percentage of the company is
.
Comment
Was this solution helpful?
1
Recommended solutions for you in Chapter 9
1
Life


Chapter 9, Problem 44P
Bookmark
Show all steps:
Chapter 9, Problem 25E

Home
Study tools

My courses
Green Rider makes three
types of electric scooters.
The company’s total fixed
cost is $1,080,000,000.
Selling prices, variable...
ON
See solution
Chapter 9, Problem 8E

My books
My folder
Career
Life

Sports Drinks, Inc. began
business in 2013 selling
bottles of a thirstquenching drink.
Production for the first
year was...
See solution
COMPANY
LEGAL & POLICIES
CHEGG PRODUCTS AND SERVICES
About Chegg
Chegg For Good
College Marketing
Corporate Development
Investor Relations
Jobs
Join Our Affiliate Program
Media Center
Site Map
Advertising Choices
Cookie Notice
General Policies
Intellectual Property Rights
Terms of Use
Global Privacy Policy
DO NOT SELL MY INFO
Honor Code
Honor Shield
Cheap Textbooks
Chegg Coupon
Chegg Play
Chegg Study Help
College Textbooks
eTextbooks
Flashcards
Learn
Uversity
© 2003-2022 Chegg Inc. All rights reserved.
Chegg Math Solver
Mobile Apps
Sell Textbooks
Solutions Manual
Study 101
Textbook Rental
Used Textbooks
Digital Access Codes
Chegg Life
Chegg Writing
CHEGG NETWORK
CUSTOMER SERVICE
EasyBib
Internships.com
Thinkful
Customer Service
Give Us Feedback
Manage Subscription