Complete Problems P2-19, P2-20, and P3-25 in the textbook and present your responses in an Excel spreadsheet. Watch the “Breakeven Point” media to assist you in completing this assignment.
APA style is not required, but solid academic writing is expected.
This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
PROBLEM 2–19 Contribution Format versus Traditional Income Statement [LO 2–6]
Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $2,450 each from the manufacturer. Marwick’s Pianos, Inc., sells the pianos to its customers at an average price of $3,125 each. The selling and administrative costs that the company incurs in a typical month are presented below:
Costs Cost Formula
Advertising …………………… $700□per□month
Sales salaries and □commissions …… $950□per□month,□plus□8%□of sales
Delivery□ of pianos sold □customers ……$30 per piano sold
Utilities. $350 per month
Depreciation□ of sales facilities. $800 per month
Executive salaries $2,500 per month
Insurance $400 per month
Clerical $1,000 per month, plus□$20 per piano sold
Depreciation of □office equipment $300 per month
During August, Marwick’s Pianos, Inc., sold and delivered 40 pianos
: 1. Prepare an income statement for Marwick’s Pianos, Inc., for August. Use the traditional format, with costs organized by function.
Supervisory salaries□ (fixed). 21,000
Total □overhead cost $174,000
Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements.
Changes in Fixed and Variable Expenses; Break-Even and Target Profit Analysis [LO3–4, LO3–5, LO3–6]
Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $3 per unit. Enough capacity exists in the company’s plant to produce 16,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.25, and fixed expenses associated with the toy would total $35,000 per month. The company’s Marketing Department predicts that demand for the new toy will exceed the 16,000 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $1,000 per month. Variable expenses in the rented facility would total $1.40 per unit, due to somewhat less efficient operations than in the main plant.