Heavener Company produces and sells storage sheds.Its current sales are $500,000.The company's accountant provided the following cost information:
$$\begin{array} { l l }
\text { Marnufacturing costs } & \$ 100,000 + 40 \% \text { of sales } \
\text { Selling costs } & \$ 30,000 + 10 \% \text { of sales } \
\text { Adrninistrative costs } & \$ 45,000 + 10 \% \text { of sales }
\end{array}$$ Required:
1)Compute the product's contribution margin ratio.
2)Compute the company's current net income.
3)Compute the product's break-even point in dollars.
4)Compute the amount of revenue necessary to earn $60,000 in profit.
5)Compute the company's current margin of safety ratio.
6)Should the company accept a proposal that increases sales by 20% and total fixed costs by 25%?

Question

Heavener Company produces and sells storage sheds.Its current sales are $500,000.The company's accountant provided the following cost information:
 $$\begin{array} { l l } 
\text { Marnufacturing costs } & \$ 100,000 + 40 \% \text { of sales } \
\text { Selling costs } & \$ 30,000 + 10 \% \text { of sales } \
\text { Adrninistrative costs } & \$ 45,000 + 10 \% \text { of sales }
\end{array}$$ Required:
1)Compute the product's contribution margin ratio.
2)Compute the company's current net income.
3)Compute the product's break-even point in dollars.
4)Compute the amount of revenue necessary to earn $60,000 in profit.
5)Compute the company's current margin of safety ratio.
6)Should the company accept a proposal that increases sales by 20% and total fixed costs by 25%?

Quizplus · Accepted Answer

The Answer of Heavener Company produces and sells storage sheds.Its current sales are $500,000.The company's accountant provided the following cost information:
 $$\begin{array} { l l } 
\text { Marnufacturing costs } & \$ 100,000 + 40 \% \text { of sales } \
\text { Selling costs } & \$ 30,000 + 10 \% \text { of sales } \
\text { Adrninistrative costs } & \$ 45,000 + 10 \% \text { of sales }
\end{array}$$ Required:
1)Compute the product's contribution margin ratio.
2)Compute the company's current net income.
3)Compute the product's break-even point in dollars.
4)Compute the amount of revenue necessary to earn $60,000 in profit.
5)Compute the company's current margin of safety ratio.
6)Should the company accept a proposal that increases sales by 20% and total fixed costs by 25%?

Heavener Company Produces and Sells Storage Sheds Required: 1)Compute the Product's Contribution Margin Ratio

Heavener Company Produces and Sells Storage Sheds Required:
1)Compute the Product's Contribution Margin Ratio