ADMN2556: Freeson Inc. Contribution Margin Income Statement - Accounting and Finance Assignment Help

Assignment Task

 ASSIGNMENT - question

1. Freeson Inc. sells its only product for $20. Variable cost is $7.50 per unit, and fixed cost is $5,000 per month.

Calculate the following (Provide all relevant calculations):

(a) The contribution margin per unit

(b) The contribution margin ratio

(c) The break-even point (in Units and Revenue $)

(d) The expected operating profit in a month when 500 units are sold

*** make sure this is in the format of a contribution margin income statement

(e) The number of units that need to be sold to make an operating profit of $2,000

*** prove your profit number in the format of a contribution margin income statement

2. Cemalock produces and markets solid oak furniture. Each bookcase requires 20 board feet of oak lumber plus fittings, which cost $50. Oak lumber costs $15 per board foot. Direct labour is paid $25 per hour, and it takes four hours to make each bookcase. The workshop in which the bookcases are made is rented at $2,000 per month. Depreciation of plant and equipment costs $100 per month. Other production and administrative overhead (all of which is fixed cost) is $5,400 per month. Each bookcase is sold for $950. Average monthly sales are 20 bookcases.

Required – SHOW ALL CALCULATIONS:

(a) Calculate the following:

(i) Variable cost per bookcase

(ii) Contribution margin per bookcase

(iii) Total fixed cost per month

(iv) Monthly break-even point in units

(v) Monthly break-even point in sales dollars

(vi) Monthly operating profit

(b) How many bookcases must be sold to make an operating profit of $5,000?

(c) If the company spent an additional $1,000 on advertising, how many additional bookcases would the company need to sell to make it worthwhile?

(d) If the company increased its price from $950 to $1,000 and sales numbers fell from 20 to 18, would this be worthwhile?

(e) If the company decreased its price from $950 to $800 and sales numbers increased from 20 to 25, would this be worthwhile?

3. Extensive Educational Services Inc. runs courses in human resources management. Each course can accommodate up to 25 students. The costs for a recent course with 25 trainees were as follows:

Computer rental ($10 per workstation plus $50 one-time setup fee)

Software license ($20 per student plus $200 per course)

Sales revenue is $500 per trainee.

Required. SHOW ALL CALCULATIONS.

 Answer the following using trainees as the measure of activity/

(a) Classify each cost line as variable, fixed, or mixed.

(b) Separate each mixed cost into its variable and fixed components.

(c) Calculate the total variable cost per trainee.

(d) Calculate the total fixed cost per course.

(e) Calculate the contribution margin per trainee.

(f) Calculate the number of trainees at which the course will break even.

(g) Calculate the profit for a course with 10 trainees.

(h) Calculate the profit for a course with 25 trainees.

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