Clicker Question Preparation Guide: Ch. 6 Clicker questions will be asked in class based on your completion of this preparation guide. Example in class question: What is the answer to Question 1) b.? You will not have time to complete this guide in class! 1. Bryson’s Brewery has the following selected information: Sales Revenue Contribution Margin Ratio Root Beer $700,000 30% Butter Beer $300,000 40% Total $1,000,000 Total Fixed Costs $264,000 a) What is Bryson’s break-even point in sales dollars for each product line (Root Beer and Butter Beer)? 2. Sleep Corporation manufactures and sells three different types of mattresses. They are referred to as Good, Supreme, and Ultimate mattresses. Stuffing and fluffing time is limited. More time is required to stuff and fluff the pads used in the Supreme and Ultimate mattresses. Additional information is provided below. Good Supreme Ultimate Selling price $80.00 $305 $999.00 Variable costs and expenses 46.80 194.60 475.00 Contribution margin $33.20 $110.40 $524.00 Stuffing and fluffing time required 0.4 hrs 1.2hrs 6 hrs a) What is the contribution margin per unit of limited resource for each type of mattress? b) If additional stuffing and fluffing time could be obtained, how should the additional capacity be used? Additional capacity should be used to make ________________ mattresses. 3. Meyers & Sons has the following unit sales and cost data for their best-selling product. Note: The following situations in parts a and b are independent of each other. Selling price per unit $600 Variable cost per unit $260 Fixed costs $429,600 Current units sold 2,800 units a) Situation A: Meyers & Sons is anticipating a price increase from their suppliers for materials, and instead of raising the selling price of their product, they have purchased additional advertising in an effort to increase their sales. If variable costs increase 10% due to the increased material costs and fixed costs increase by $10,000 due to the additional advertising, what is the new amount of units that they need to sell to break-even?b) Situation B: Meyers & Sons is considering purchasing additional advertising for $15,000 in an effort to be more competitive in the market. What is the change in Net Income the company can expect based on this change in fixed costs, and assuming they are able to increase their sales to 3,400 units sold? 4. Maverick Company produces basketballs. It incurred the following costs during the year: Direct materials $14,850 Direct labor $25,450 Fixed manufacturing overhead $11,850 Variable manufacturing overhead $29,550 Selling costs $21,050 a) What are the total product costs for the company under variable costing? b) What are the total product costs for the company under absorption? 5. Harris Company’s fixed overhead costs are $4 per unit, and its variable overhead costs are $8 per unit. In the first month of operations, 50,000 units are produced and 46,000 units are sold. Which costing approach will report higher net income and why? By what amount will net income be different between the two costing
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