The Waldo Company Had the Following Functional Income Statement for the Month

question 32

Essay

The Waldo Company had the following functional income statement for the month of July:
$\begin{array}{lrr}\text { Sales }(\$ 20 \times 20,000 \text { units }) & & \$ 400,000 \\\text { Costs of goods sold: } && \\\text { Direct materials } & \$ 60,000 & \\\text { Direct labour } &40,000 & \\\text { Variable factory overhead } &120,000 \\\text { Fixed factory overhead } & \underline{50,000} & \underline{270,000} \\\text { Gross profit } & & \$ 130,000\\\text { Selling and administrative expenses: } \\\text { Variable } &\$ 20,000 & \\\text { Fixed } & \underline{50,000} & \underline{70,000}\\\text { Operating income }&& \$ 60,000\end{array}$
There were no beginning and ending inventories.
a.Calculate the contribution margin per unit.
b.Calculate the contribution margin ratio.
c.What is the break-even point in units?
d.What is the amount of sales in dollars needed to obtain a before-tax profit of $40,000?

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Definitions:

Control Limits

Predetermined boundaries in statistical process control that indicate if a process is in a state of control or out of control.

Chance Variation

Variations in observations or data that result from random effects or events that cannot be controlled or predicted.

Sample Mean

The average value of a sample set of numbers, calculated by adding all the values and dividing by the number of values.

Control Limits

The boundaries in a control chart beyond which points indicate a statistical process is out of control.