Reference no: EM133165931

Question - a. Kingston Baker's Ltd. most recent monthly contribution format income statement is given below for 6000 units

$

Sales (6000 units) 90,000

Less variable expenses 67,500

Contribution margin 22,500

Less fixed expenses 18,000

Net Income 4,500

Calculate:

(a) the company's contribution margin ratio?

(b) the breakeven points in units and in dollar sales?

(c) the margin of safety in units and dollar value if the company's intention is to sell 10000 units.

(d) How many units would the company need to sell if it wishes to make a profit of $25000?

(e) If unit sales were increased by 25% and fixed expenses were reduced by $4,000, what would be the company's expected net income? (Prepare a contribution margin income statement to represent your response)

b. The Ryan Corporation manufactures a single product with the following unit cost for 5000 units:

$

Direct Materials 80

Direct labour 40

Manufacturing overheads (40% variable) 120

Selling expenses (60% variable) 40

Administrative expenses (20% variable) 20

Total unit cost 300

A company recently approached Ryan Corporation about buying 1000 units for $195. Ryan currently sells the models to dealers for $210 per unit. Ryan's capacity is sufficient to produce the extra 1000 units.

(i) Should Ryan accept this special order? Justify your answer.

(ii) Determine the minimum price that Ryan should sell each unit for in order to make a profits by $10000 on the special order.