Question 1:
Prof. O'Brien realized his dream and opened O'Brien Vineyards. At this point, he only gives a Pinot Noir but hopes to insert a new wine next year. Since he has been focused on wine production, he has not been able to keep up with the managerial accounting responsibilities.
O'Brien Vineyards contribution format income statement for September.
Sales 300,000
Variable Expenses 114,450
Fixed Expenses 79,900
Net Operating Income 31,900
O'Brien Vineyards has no opening or ending inventories. The company produced and sold 15,000 bottles last month. Price per bottle is $20.00.
a. Evaluate O'Brien Vineyards contribution margin?
b. Evaluate O'Brien Vineyards contribution margin per unit?
c. Compute O'Brien Vineyards contribution margin ratio?
d. If O'Brien Vineyards sells 21,000 bottles of wine, its net contribution margin should be.
e. If O'Brien Vineyards sells 29,000 bottles of wine, its net operating income could be.
f. Determine O'Brien Vineyards break-even sales in dollars?
g. Determine O'Brien Vineyards break-even sales in units?
h. How many units would O'Brien Vineyards have to sell to achieve target profits of $52,000?
i. Evaluate O'Brien Vineyards margin of safety percentage?
j. Determine O'Brien Vineyards degree of operating leverage?
Question 2:
O'Brien Vineyards recorded the subsequent transactions for the month just completed.
Required: Record the given transactions in journal entries.
a. $60,000 in raw materials were purchased on account.
b. $51,000 in raw materials were demanded for use in production. Of this amount, $42,000 was for direct materials and the residue was for indirect materials.
c. Net labor wages of $92,000 were incurred and paid. Of this amount, $81,000 was for direct labor and the residue was for indirect labor.
d. Further manufacturing overhead cost of $155,000 were incurred. All were on account.
e. The cost of goods manufactured for the year was $1,004,000.
f. Sales for the year totaled $1,416,000 and the costs on the job cost sheets of the goods that were sold totaled $989,000.