Original Data:
Selling Price per unit = $20.00
Variable Cost per unit = Variable Expenses / Number of units
sold
Variable Cost per unit = $153,600 / 12,800
Variable Cost per unit = $12.00
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $20.00 - $12.00
Contribution Margin per unit = $8.00
Answer 1.
Contribution Margin Ratio = Contribution Margin per unit /
Selling Price per unit
Contribution Margin Ratio = $8.00 / $20.00
Contribution Margin Ratio = 40%
Breakeven Point in unit sales = Fixed Expenses / Contribution
Margin per unit
Breakeven Point in unit sales = $114,400 / $8.00
Breakeven Point in unit sales = 14,300
Breakeven Point in dollar sales = Fixed Expenses / Contribution
Margin Ratio
Breakeven Point in dollar sales = $114,400 / 0.40
Breakeven Point in dollar sales = $286,000
Answer 2.
Increase in Sales = $89,000
Increase in Fixed Expenses = $6,900
Increase in Net Operating Income = Increase in Sales *
Contribution Margin Ratio - Increase in Fixed Expenses
Increase in Net Operating Income = $89,000 * 0.40 - $6,900
Increase in Net Operating Income = $28,700
Answer 3.
Selling Price per unit = $20.00 - 10% * $20.00
Selling Price per unit = $18.00
Fixed Expenses = $114,400 + $34,000
Fixed Expenses = $148,400
Number of units sold = 2 * 12,800
Number of units sold = 25,600
Net Operating Income (Loss) = Number of units sold * (Selling
Price per unit - Variable Cost per unit) - Fixed Expenses
Net Operating Income (Loss) = 25,600 * ($18.00 - $12.00) -
$148,400
Net Operating Income (Loss) = $5,200
Answer 4.
Variable Cost per unit = $12.00 + $0.70
Variable Cost per unit = $12.70
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $20.00 - $12.70
Contribution Margin per unit = $7.30
Required Unit Sales = (Fixed Expenses + Target Profit) /
Contribution Margin per unit
Required Unit Sales = ($114,400 + $5,000) / $7.30
Required Unit Sales = 16,356
Answer 5-a.
Variable Cost per unit = $12.00 - $3.00
Variable Cost per unit = $9.00
Fixed Expenses = $114,400 + $59,000
Fixed Expenses = $173,400
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $20.00 - $9.00
Contribution Margin per unit = $11.00
Contribution Margin Ratio = Contribution Margin per unit /
Selling Price per unit
Contribution Margin Ratio = $11.00 / $20.00
Contribution Margin Ratio = 55%
Breakeven Point in unit sales = Fixed Expenses / Contribution
Margin per unit
Breakeven Point in unit sales = $173,400 / $11.00
Breakeven Point in unit sales = 15,764
Breakeven Point in dollar sales = Fixed Expenses / Contribution
Margin Ratio
Breakeven Point in dollar sales = $173,400 / 0.55
Breakeven Point in dollar sales = $315,273
Answer 5-b.
Answer 5-c.
Yes, company should automate its operations
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 (13,200 units x $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 396,000 198,000 198,000 220,500 $ (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 (13,200 units * $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 396,000 198,000 198,000 229,500 $ (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 (12,600 units * $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 378,000 226,800 151,200 169,200 $ (18,000) Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes...
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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 (12,700 units X $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 254,000 152,400 101,600 113,600 $ (12,000) 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 (13,200 units * $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 396,000 237,600 158, 400 176,400 $ (18,000) Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president...
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 (12,800 units X $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 384,000 230,400 153,600 171,600 $ (18,000) 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 * $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 393,000 235, 800 157,200 175, 200 $ (18,000) Required: Reg 1 Reg 2 Req3 Req 4 Req 5A Req 5B Req 5C Compute the company's CM ratio...
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 $ 399,000 239,400 159,600 177,600 $ (18,000) 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 (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...