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1. Waco Printing Company specializes inprinting banners on a high quality, nylon material that canwithstand extreme temperatures. The company pays sale personnel asmall base salary plus a large commission on each banner sold toencourage a large sales volume.

The following is a summary of therevenue and cost data:

Per Banner

SellingPrice $400.00

Variable Costs

Materials $180.00

Sales Commission 80.00

Fixed Costs

Rent $3,200

Advertising 75,000

Salessalaries 3,000

Refer to the original data. If the company eliminatesthe sales commission and increases salaries by $50,800, what willbe the new breakeven point in units? In sales dollars?

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Irving Heathcote
Irving HeathcoteLv2
28 Sep 2019

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Waco Printing Company specializes in printing banners on a highquality, nylon material that can withstand extreme temperatures.The company pays sale personnel a small base salary plus a largecommission on each banner sold to encourage a large salesvolume.

The following is a summary of therevenue and cost data:

Per Banner

SellingPrice $400.00

Variable Costs

Materials $180.00

Sales Commission 80.00

Fixed Costs

Rent $3,200

Advertising 75,000

Salessalaries 3,000

If 600 banners are sold each month, what would be thenet operating income?

Problem 1: The following is an income statement from Jimmy’sCoat Store for the month ended January 31:

Jimmy’s Coat Store

Income Statement

For the Month Ended January 31

Sales $750,000

Cost of GoodsSold 300,000

GrossMargin 450,000

Less Operating Expenses

Selling $23,560

Administrative 49,500 73,060

Net OperatingIncome $376,940

On average, a coat sells for $250. Employees are paid acommission of $6.50 per coat sold and the remainder of the sellingexpense is fixed. Variable administrative expenses are $12.50 perunit with the remainder being fixed. As always, it is assumed thatcost of goods sold is all variable.

1.What is the contribution per unitfor Jimmy’s?

2.What is Jimmy’s total contributionmargin for the month of January?

Problem 2: Assume the following information for The Amazing FoamFrisbee, Inc.:

Selling price perunit: $12.00

Variable cost perunit: $3.00

Fixedcosts: $36,000

3.What is the breakeven point inunits?

4.What is the breakeven point insales dollars

Problem 3: Waco Printing Company specializes in printing bannerson a high quality, nylon material that can withstand extremetemperatures. The company pays sales personnel a small base salaryplus a large commission on each banner sold to encourage a largesales volume.

The following is a summary of therevenue and cost data:

Selling price perunit $400.00

Variable costs per banner

Materials $180.00

Sales Commission $80.00

Fixed Costs

Rent $3,200

Advertising $75,000

Salessalaries $3,000

5.What is the company’s contributionmargin ratio?

6.If 600 banners are sold each month,what would be the net operating income?

7.How much additional profit wouldWaco Printing earn if sales revenue increases by $20,000?

Problem 4: Custom Hunter, Ltd. sells a customized gun pouch thatsells for $32.00. The contribution margin ratio on the product is55%. Last month the company earned $23,320 when 3,475 units weresold.

8. Prepare a contribution marginincome statement based on last year’s sales.

9. What is the break-even point inunits?

10. What is the break-even point insales dollars?

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