ACCT 346 Week 4 Homework 1. Active Equipment produces high-quality basketballs. If the fixed cost per basketball is $3 when the company produces 24,000 basketballs, what is the fixed cost per basketball when it produces 36,000 basketballs? Assume both volumes are in the same relevant range. Identif...
1. Active Equipment produces high-quality basketballs. If the fixed cost per basketball is $3 when the company produces
24,000 basketballs, what is the fixed cost per basketball when it produces 36,000 basketballs? Assume both volumes are in
the same relevant range.
Identify the formula, then compute the new fixed cost per basketball when it produces 36,000 basketballs.
New fixed cost
Total fixed cost / Number of basketballs produced = per basketball
$72,000 / 36,000 = $2.00
2. Pamela's Quilt Shoppe sells homemade Amish quilts. Pamela buys the quilts from local Amish artisans for $270 each, & her
shop sells them for $470 each. She also pays a sales commission of 6% of sales revenue to her sales staff.
Pamela leases her country-style shop for $1,400 per month & pays $2,100 per month in payroll costs in addition to the
sales commissions. Pamela sold 100 quilts in February. Prepare Pamela's traditional income statement & contribution
margin income statement for the month.
Prepare the traditional income statement for the month.
Pamela's Quilt Shoppe
Income Statement
For the Month Ended February 28
Sales revenue $ 47,000
Less:
Cost of goods sold 27,000
Gross profit 20,000
Less: Operating expenses
Sales commissions $ 2,820
Payroll costs 2,100
Lease 1,400
Operating income $ 13,680
Prepare the contribution margin income statement for the month.
Pamela's Quilt Shoppe
Contribution Margin Income Statement
For the Month Ended February 28
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