Accounting Assignment

Q. 1. Amy's Boards

Break Even analysis is a technique that determines the stage at which total revenues earned by a company are equal to its total cost. At this point there is no gain or loss. Break even point can be calculated with the help of following formula

Break Even Point = (Fixed cost) / (selling price - Variable cost)

Let's assume, if it costs $100 to manufacture a chair, and there are fixed cost of $2000, than the break even point for producing (selling) the chairs would be;

If selling for $200, 20 chairs

Break Even Point = (Fixed cost) / (selling price - Variable cost)

Break even point = (FC / (SP-VC)

Break Even point = (2000 / (200 - 100)

Break Even point = 20

If selling for $400, 7 Chairs

Break Even Point = (Fixed cost) / (selling price - Variable cost

Break Even point= (FC / (SP-VC)

Break Even point= (2000/ (400-100)

Break Even point= 6.7

In the above example, if a manufactures or producer sells the chairs at a higher price, Break even point will come earlier.

Q. 2. Hammer Products, Inc.

HAMMER PRODUCTS, INC.

Income Statement

Product Model

Total

B-10

C-20

Sales

$14,500,000

$12,000,000

$2,500,000

Cost of goods sold

9,000,000

7,200,000

1,800,000

Gross margin

5,500,000

4,800,000

700,000

Less selling and administrative expenses

4,900,000

4,600,000

300,000

Net income

$ 600,000

$ 200,000

$ 400,000

Number of units produced and sold

-

60,000

10,000

Net income per unit

-

$3.33

$40.00

Journal Entries

S.R

Particulars

Debit

Credit

1

Wages 

264,000

 

 

Wages payable

 

264,000

2

Account Receivable 

1,254,000

 

 

Sales (Revenue)

 

1254000

 

Cost of Goods Sold

750000

 

 

Inventory

 

750000

3

Account Payables

1,020,000

 

 

Cash

 

1,020,000

4

Purchases 

480,000

 

 

Cash

 

480,000

5

Prepaid insurance

504,000

 

 

Insurance 504,000

6

Cash

1,680,000

 

 

Account Receivable 

 

1,680,000

7

Cash

270,000

 

 

Sales (Revenue)

 

270,000

 

Cost of Goods Sold

192,000

 

 

Inventory

 

192,000

8

Interest Expense

10,000

 

 

Interest Payable

 

10,000

9

Unearned Revenue

348,000 Service Income

 

348,000

10

Accrued Wages 60,000

 

 

Wages expense

186,000

 

 

Cash 

 

246,000

11

Prepaid Expense

144,000

 

 

Cash

 

144,000

12

Adminitsrative Expenses

126,000

 

 

Cash

 

126,000

13

Bad Debts Account

78,000

 

 

Hawthorne Account

 

78,000

14

Bad Debts Expense

108,000 ...