Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 20-07
EASYWRITER
Computations
a. Contribution margin per unit:
Unit sales price
Less: Variable cost per unit
Contribution margin per unit
b. Margin of safety at sales of 45,000 units:
Sales revenue
Less: Sales revenue at break-even point
Margin of safety

1.75
1.25
0.50

- Correct!

$78,750
70,000
$ 8,750

- Correct!

c. Estimated operating loss at sales level of 38,000 units:

Sales revenue
$66,500
Less: Variable costs
$47,500
Fixed costs
20,000
67,500
Operating income (loss)
$ (1,000)
d. Total cost per unit:
(1) Unit cost at production level of 40,000 units:
Variable cost per unit
Fixed cost per unit
Total unit cost
(2) Unit cost at production level of 50,000 units:
Variable cost per unit
Fixed cost per unit
Total unit cost

$
$
$
$

- Correct!

1.25
0.50
1.75

- Correct!

1.25
0.40
1.65

- Correct!

Given Data P20-07:

EASYWRITER
Sales price per unit
Break-even point in units
Total variable costs
Total fixed costs
b. Monthly sales (units)
c. Monthly sales (units)
d (1) Monthly production level
d (2) Monthly production level

1.75
40,000
$ 50,000
$ 20,000
45,000
38,000
40,000
50,000

Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 20-09
PRECISION SYSTEMS
Computations
a. Variable costs per unit before 15% increase in the cost
of direct labor
Increase in cost of direct labor
Variable costs and expenses per unit after 15% increase
in the cost of direct labor
New sales price
Sales price before increase
Required increase in sales price per unit
b. Unit contribution margin:
Sales price per unit
Less: Variable costs per unit following 15% increase in
direct labor cost
Unit contribution margin
Sales volume required to maintain current operating income:
Fixed costs
Target operating income
Unit contribution margin
Sales volume required in units

60
3

63

- Correct!

$
$

105
100
5

- Correct!

100

63
37

- Correct!

$ 390,000
350,000
37
20,000

- Correct!

c. Operating income at full capacity before and after expansion:

Total contribution margin

Less: Fixed costs
Operating income at full capacity

Current
Capacity
20,000
$740,000
390,000
$350,000

After
Expansion
25,000
$ 925,000
530,000
$ 395,000

^ Correct!

^ Correct!

Given Data P20-09:

PRECISION SYSTEMS
Units sold annually
18,500
Anticipated increase in the cost per unit of dir
15%
Beginning and ending inventory
1,000
Sales price per unit
Variable costs per unit:
Direct materials
Direct labor
Manufacturing overhead and selling and
administrative expenses
Contribution margin per unit (40%)
Fixed costs
Current contribution margin
Current operating income
Present capacity
Additional machinery
Depreciation rate per year
Added capacity

$
$

10
20
30

100

60
$

40

$390,000
40%
$350,000
20,000
$700,000
20%
25%

Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 20-10
PERCULA FARMS
Computations
a. Operating income:

Number of salable fish

x sale price
Total revenue
Variable costs:
Eggs
Feedings
Water changes
Heating and lighting
Total variable costs
Total contribution margin
Fixed costs:
Operating income

Clownfish
Angelfish
100,000
50,000
$
4 $
10
$ 400,000 $ 500,000
$

5,500
78,750
35,000
14,000
133,250
266,750
80,000
$ 186,750
^ Correct!

9,500
150,000
100,000
20,000
279,500
220,500
80,000
$ 140,500
^ Correct!

b. Other than Fixed costs, which factors or categories of

costs seem to have the greatest influence or operating
income?
The most important factors in determining operating
income are survival rates, and the costs of feeding
and water changes.

c. 1. Operating income with new filter material:

Number of salable fish

x sale price
Total revenue
Variable costs:
Eggs
Feedings
Water changes
Heating and lighting
Total variable costs
Total contribution margin
Fixed costs:
Operating income

Clownfish
Angelfish
120,000
60,000
$
4 $
10
$ 480,000 $ 600,000
$

5,500
84,000
35,000
14,000
138,500
341,500
88,000
$ 253,500
^ Correct!

9,500
160,000
50,000
20,000
239,500
360,500
88,000
$ 272,500
^ Correct!

Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 20-10
c. 2. Operating income with new equipment:

Number of salable fish

x sale price
Total revenue
Variable costs:
Eggs
Feedings
Water changes
Heating and lighting
Total variable costs
Total contribution margin
Fixed costs:
Operating income

Clownfish
Angelfish
105,000
55,000
$
4 $
10
$ 420,000 $ 550,000
$

5,500
78,750
35,000
10,500
129,750
290,250
88,000
$ 202,250
^ Correct!

9,500
150,000
100,000
15,000
274,500
275,500
88,000
$ 187,500
^ Correct!

Given Data P20-10:

PERCULA FARMS
Eggs per batch
Clownfish eggs cost per batch
Angelfish eggs cost per batch
% of Clownfish raised to maturity
% of Angelfish raised to maturity
Weeks for Clownfish to grow to salable size
Weeks for Angelfish to grow to salable size
Angelfish:
# of water changes per week
# of feedings per week
Clownfish:
# of water changes per week
# of feedings per week
Cost per feeding
Cost per water change
Heating and lighting costs per week of rearing
Fixed overhead per year
Clownfish sales price
Angelfish sales price
Improvements considered:
1. Higher quality filter material
Cost
Increase in survival rate - Clownfish
Increase in survival rate - Angelfish
# of water changes - both species
Feeding cost increase - both species
2. More efficient equipment
Cost
Survival rate - Clownfish
Survival rate - Angelfish
Heating and lighting costs per week

1,000,000
$ 5,500
$ 9,500
10%
5%
35
50
2
20
1
15
$
150
1,000
400
80,000
4
10

8,000
12%
6%
1
$160

8,000
10.5%
5.5%
300