Turgo Company: Variable Costs Are 63% Of Sales And Fixed Cos

Question

For Turgo Company Variable Costs Are63 Of Sales And Fixed Costs For Turgo Company, variable costs are 63% of sales, and fixed costs are $177,300. Management’s net income goal is $78,740. Compute the required sales in dollars needed to achieve management’s target net income of $78,740. The problem involves calculating the sales level needed to reach a specific net income, considering the proportion of variable costs and fixed costs. The contribution margin per dollar of sales is 37%, since variable costs are 63%, leaving 37% as contribution margin. The net income goal is $78,740, and fixed costs are $177,300. Using the contribution margin approach, we can compute the required sales as follows: Required Sales = (Fixed Costs + Target Net Income) / Contribution Margin Ratio Contribution Margin Ratio = 1 - Variable Cost Percentage = 1 - 0.63 = 0.37 Therefore, Required Sales = ($177,300 + $78,740) / 0.37 = $256,040 / 0.37 ≈ $692,540.54 Thus, the required sales volume in dollars to meet the target net income is approximately $692,541. For Kozy Company, actual sales are $1,138,000 and break-even sales are $773,840 Compute the margin of safety in dollars and the margin of safety ratio. The margin of safety measures how much sales can drop before reaching the break-even point. It can be calculated as: Margin of Safety (Dollars) = Actual Sales - Break-even Sales = $1,138,000 - $773,840 = $364,160 Margin of Safety Ratio = Margin of Safety (Dollars) / Actual Sales = $364,160 / $1,138,000 ≈ 0.32 or 32% Therefore, Kozy Company has a margin of safety of $364,160, which is approximately 32% of its actual sales. Montana Company produces basketballs. It incurred the following costs during the year. Direct materials $14,709 Direct labor $25,321 Fixed manufacturing overhead $9,748 Variable manufacturing overhead $32,344 Selling costs $20,870 What are the total product costs for the company under variable costing? Under variable costing, only variable production costs are considered prod

Dr. Jack HW Helper · Accepted Answer

This comprehensive analysis addresses several key managerial accounting concepts, including cost-volume-profit analysis, budgeting, and cost behavior. Starting with the sales volume required to meet a specific net income goal for Turgo Company, the process exemplifies leveraging contribution margin ratios to determine necessary sales levels. The calculation demonstrates the practical application of break-even analysis and targeted profit planning, where fixed costs and desired net income are combined to find the sales required to achieve strategic financial objectives. Moving to Kozy Company’s scenario, the focus shifts to evaluating its safety margin, both in dollar and ratio terms. The calculation illustrates the importance of the margin of safety as an indicator of risk, reflecting how much sales could decline before operations reach the break-even point. Such analysis helps managers understand their firm’s vulnerability to sales fluctuations and informs strategic decision-making to mitigate risk and buffer against unforeseen downturns. The discussion of Montana Company’s product costs under variable costing emphasizes cost behavior and managerial decision-making. Fixed manufacturing overhead, under variable costing, is excluded from product costs, aligning with the managerial focus on variable costs that fluctuate with production levels. The computation confirms the total variable product costs, guiding inventory valuation and costing strategies within managerial accounts. In the context of Maris Company’s budget reporting, the static budget comparison for sales provides insights into operational performance. Differences between budgeted and actual sales are essential for variance analysis, enabling management to identify favorable or unfavorable deviations. The inclusion of margin safety and ratio analysis further enriches this evaluation by quantifying the firm’s financial buffer, crucial for strategic planning and risk assessment. Gundy Company’s flexible man

Turgo Company: Variable Costs Are 63% Of Sales And Fixed Cos

For Turgo Company Variable Costs Are63 Of Sales And Fixed Costs

For Kozy Company, actual sales are $1,138,000 and break-even sales are $773,840

Montana Company produces basketballs. It incurred the following costs during the year. Direct materials $14,709 Direct labor $25,321 Fixed manufacturing overhead $9,748 Variable manufacturing overhead $32,344 Selling costs $20,870

For the quarter ended March 31, 2012, Maris Company accumulates the following sales data for its product, Garden-Tools: $310,800 budget; $339,100 actual. Prepare a static budget report for the quarter.

Gundy Company expects to produce 1,227,600 units of Product XX in 2012

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