Heavener Company produces and sells storage sheds. Its current sales are $500,000. The company's accountant provided the following cost information:
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%?
$$\begin{array} { | l | l | }
\hline \text { Manufacturing costs } & \$ 100,000 + 40 \% \text { of sales } \
\hline \text { Selling costs } & \$ 30,000 + 10 \% \text { of sales } \
\hline \text { Administrative costs } & \$ 45,000 + 10 \% \text { of sales } \
\hline
\end{array}$$

Question

Heavener Company produces and sells storage sheds. Its current sales are $500,000. The company's accountant provided the following cost information:
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%?
 $$\begin{array} { | l | l | } 
\hline \text { Manufacturing costs } & \$ 100,000 + 40 \% \text { of sales } \
\hline \text { Selling costs } & \$ 30,000 + 10 \% \text { of sales } \
\hline \text { Administrative costs } & \$ 45,000 + 10 \% \text { of sales } \
\hline
\end{array}$$

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:
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%?
 $$\begin{array} { | l | l | } 
\hline \text { Manufacturing costs } & \$ 100,000 + 40 \% \text { of sales } \
\hline \text { Selling costs } & \$ 30,000 + 10 \% \text { of sales } \
\hline \text { Administrative costs } & \$ 45,000 + 10 \% \text { of sales } \
\hline
\end{array}$$

Heavener Company Produces and Sells Storage Sheds