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1. Texas Company produces one product that it sells for $50 per unit. In producing that product, Texas Company incurs…

1. Texas Company produces one product that it sells for $50 per unit. In producing that product, Texas Company incurs…

Daniel Kevins

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1. Texas Company produces one product that it sells for $50 per unit. In producing that product, Texas Company incurs variable costs of $35 per unit and fixed costs of $400,000. How many units of the product will Texas Company have to produce and sell to earn a profit of $42,000? (Be sure round up.)

Alabama Corporation and California Corporation have the same sales and profits as follows:

Alabama California

Sales                                  $1,000,000                     $1,000,000
Variable Costs                        600,000                         400,000
Contribution Margin                   400,000                         600,000
Fixed Costs                              200,000                         400,000
Profit                                        200,000                         200,000

Using an operating leverage analysis, determine how much profits would increase for each company if each experienced a 10% increase in sales.

3. Virginia, LLC, sells its product for $20 and incurs variable costs in producing that product of $8 per unit and total fixed costs of $10,000. Using the contribution margin ratio approach, calculate the number of units of the product that Virginia, LLC must sell to generate a profit of $14,400.

4.Arkansas Company provided the following information at the end of 2010:

Beginning balance in Work-In-Progress                                    $300,000
Ending balance in Work-In-Progress                                          350,000
Beginning balance in Finished Goods                                        400,000
Ending balance in Finished Goods                                            350,000
Direct materials costs                                                           1,000,000
Direct labor costs                                                                 2,000,000
Manufacturing overhead                                                         2,000,000
Selling expenses                                                                     300,000
General and administrative expenses                                         200,000
Sales                                                                                   8,000,000

Prepare an income statement for fiscal year 2010.

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Daniel Kevins

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