Posted: January 5th, 2014

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

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.)

2.
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.