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Expert-verified Found in: Page 1133 ### Horngren'S Financial And Managerial Accounting

Book edition 6th
Author(s) Tracie L. Miller-Nobles, Brenda L. Mattison
Pages 992 pages
ISBN 9780134486833

# The budgets of four companies yield the following information: Company Blue Red Green Yellow Net Sales Revenue $1,900,000$ (d) $1,500,000$ (j) Variable Costs (a) 47,250 1,050,000 256,200 Fixed Costs (b) 168,000 159,000 (k) Operating Income (Loss) 298,500 (e) (g) 97,800 Units Sold 190,000 9,000 (h) (l) Contribution Margin per Unit $3.00$ (f) $75.00$ 18.00 Contribution Margin Ratio (c) 80% (i) 30% Requirements 1. Fill in the blanks for each missing value. (Round the contribution margin per unit to the nearest cent.) 2. Which company has the lowest breakeven point in sales dollars? 3. What causes the low breakeven point?

(1) (a) $1,330,000 (b) 271,500 (c) 30% (d)$236,250

(e) $21,000 (f)$21

(g) $291,000 (h) 6,000 (i) 30% (j)$366,000

(k) $12,000 (l) 6,100 (2)Yellow has the lowest breakeven point that is$40,000.

(3) Low contribution margin ratio and sales.

See the step by step solution

## Step 1: Calculation of (a), (b), (c)

 Net sales revenue $1,900,000 Variable costs ($1,900,000 / 190,000)-$3 ) x 190,000 (a)$1,330,000 Fixed costs ($1,900,000 -$1,330,000-$298,500) (b)$271,500 Operating income (Loss) $298,500 Units sold 190,000 Contribution margin per unit$3 Contribution margin ratio ($3 / ($1,900,000 / 190,000) (c)30%

## Step 2: Calculation of (d), (e), (f)

 Net sales revenue ($47,250 / (1-80%)) (d)$236,250 Variable costs $47,250 Fixed costs$168,000 Operating income (Loss) ($236,250 -$47,250-$168,000) (e)$21,000 Units sold 9,000 Contribution margin per unit ($236,250/9,000) x 80% (f)$21 Contribution margin ratio 80%

## Step 3: Calculation of (g), (h), (i)

 Net sales revenue $1,500,000 Variable costs$1,050,000 Fixed costs $159,000 Operating income (Loss) ($1,500,000-$1,050,000-$159,000) (g) $291,000 Units sold ($1,500,000-$1,050,000) / 75 (h) 6,000 Contribution margin per unit$75 Contribution margin ratio (i)30%

## Step 4: Calculation of (j), (k), (l)

 Net sales revenue ($256,200 / (1-30%) (j)$366,000 Variable costs $256,200 Fixed costs ($366,000 - $256,200 -$97,800) (k)$12,000 Operating income (Loss)$97,800 Units sold ($366,000 -$256,200) / $18 (l)6,100 Contribution margin per unit$18 Contribution margin ratio 30%

## Step 5: Calculation of breakeven sales in dollars    ## Step 6: Cause of low breakeven point

Low contribution margin causes the low breakeven point. Yellow has the lowest contribution margin ratio that is why it has the lowest breakeven point. ### Want to see more solutions like these? 