1.CM Ratio = Contribution Margin/Sales
= 130,000/260,000
= 50%
Break even point in unit sales = Fixed costs/Contribution Margin per unit
= 145,000/10
= 14,500 units
Dollar sales = 145,000/50%
= $290,000
2.Increase in Net Operating Income = Increase in Contribution Margin – Increase in cost
= 80,000*50% - 6,200
= $33,800
3.Net operating Income = 26,000*(18-10) – 145,000-33,000
= $30,000
4.Target Profit = $4,500
Fixed costs = 145,000
Target Contribution Margin = $149,500
Units required to be sold = 149,500/(20-10-0.5)
= 15,736.84 units
5.CM Ratio = (20-7)/20 = 65%
Break even point in unit sales = (145,000+57,000)/13 = 15,538.46 units
Dollar sales = 202,000/65%
= $310,769.23
b.
Without Automation |
With Automation |
|||||
Per unit |
Total |
% |
Per unit |
Total |
% |
|
Sales |
20 |
402,000 |
100.00% |
20 |
402,000 |
100.00% |
Variable expenses |
10 |
201,000 |
50.00% |
7 |
140,700 |
35.00% |
Contribution Margin |
10 |
201,000 |
50.00% |
13 |
261,300 |
65.00% |
Fixed Expenses |
7.213930348 |
145,000 |
36.07% |
10.04975124 |
202,000 |
50.25% |
Net operating income |
2.786069652 |
56,000 |
13.93% |
2.950248756 |
59,300 |
14.75% |
Yes, should automate
Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Inc., has been...
Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below: Sales (19,500 units × $30 per unit) $ 585,000 Variable expenses 409,500 Contribution margin 175,500 Fixed expenses 180,000 Net operating loss $ (4,500 ) Required: 1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales. 2. The...
Due to erratic sales of its sole product-a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (13,300 units * $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 399,000 199,500 199,500 222,000 $ (22,500) Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes...
Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below: Sales (13,100 units × $20 per unit) $ 262,000 Variable expenses 131,000 Contribution margin 131,000 Fixed expenses 146,000 Net operating loss $ (15,000 ) Required: 1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales. 2. The...
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Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below: Sales (13,000 units × $20 per unit) $ 260,000 Variable expenses 130,000 Contribution margin 130,000 Fixed expenses 145,000 Net operating loss $ (15,000 ) Required: 1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales. 2. The...
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Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Inc., has been experiencing difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (12,700 units < $40 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss 508,000 254,000 254,000 284,000 (30,000) Required: 1. Compute the company's CM ratio and its break-even point in both unit sales and dollar sales. CM ratio Break-even point in units...
Due to erratic sales of its sole product-a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (19,500 units $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 585,000 409,500 175,500 180,000 $ (4,500) Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that...
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Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below: Sales (12,900 units × $20 per unit) $ 258,000 Variable expenses 129,000 Contribution margin 129,000 Fixed expenses 144,000 Net operating loss $ (15,000 ) Required: 1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales. 2. The...