Question

Carla Vista Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The blankets retail for $49 throughout the country to loyal alumni of over 1,700 schools. Carla Vista's variable costs are 40% of sales, fixed costs are $120,000 per month. (1) Your answer is correct. Calculate contribution margin ratio. (Round ratio to 2 percentage places, eg. 0.38-38%.) Contribution margin ratio 60 % eTextbook and Media Attempts: 1 of 12 used (2) ✓ Your answer is correct. What is Carla Vista's annual breakeven point in sales dollars? (Use the rounded contribution margin ratio calcuated in the previous part to compute breakeven sales.) Breakeven sales $ 2,400,000 eTextbook and Media Attempts: 1 of 12 used ✓ Your answer is correct. Carla Vista currently sells 150.000 blankets per year. If sales volume were to increase by 17%, by how much would operating income increase? (Round answer to decimal places, e.g. 5,275.) Operating income $ 749,700 eTextbook and Media Attempts: 2 of 12 used Your answer is incorrect. Assume that variable costs increase to 47% of the current sales price and fixed costs increase by $12,100 per month. If Carla Vista were to raise its sales price by 12% to cover these new costs, what would be the new annual breakeven point in sales dollars? (Round sales price to 2 decimal places, eg 52.75 and final answer to decimal places, e.g. 5,275.) Breakeven sales $
solve C

Answer 1

Selling price per unit = $49

variable cost per unit = 40% of selling price per unit

= 49 x 40%

= $19.6

Fixed cost = $120,000 per month

Proposed changes :

Variable cost per unit = 47% of selling price per unit

= 49 x 47%

= $23.03

Increase in foxed cost = $12,100 per month

Fixed cost (After increase) = 120,000 + 12,100

= $132,100 per month

Annual fixed cost = 132,100 x 12

= $1,585,200

Increase in selling price = 12%

= 49 x 12%

= $5.88

Selling price per unit (after increase) = 49 + 5.88

= $54.88

Contribution margin per unit = Selling price per unit - Variable cost per unit

= 54.88 - 23.03

= $31.85

Contribution margin ratio = Contribution margin per unit/Selling price per unit

= 31.85/54.88

= 58.04%

Break even point in dollar = Fixed cost/Contribution margin ratio

= 1,585,200/58.04%

= $2,731,219.85

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