Question

The Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to meet sales demand in the coming year. He is also trying to determine how the company’s profits might be increased in the coming year. This problem asks you to use cost-volume-profit concepts to help Waterways understand contribution margins of some of its products and decide whether to mass-produce any of them.
Waterways markets a simple water control and timer that it mass-produces. Last year, the company sold 720,000 units at an average selling price of $4.70 per unit. The variable costs were $2,030,400, and the fixed costs were $879,840.

What is the product’s contribution margin ratio? (Round ratio to 0 decimal places, e.g. 25%.)

What is the company’s break-even point in units and in dollars for this product?

What is the margin of safety, both in dollars and as a ratio? (Round ratio to 0 decimal places, e.g. 25%.)

If management wanted to increase its income from this product by 10%, how many additional units would have to be sold to reach this income level?

Waterways would have to sell an additional ____ Units

If sales increase by 55,000 units and the cost behaviors do not change, how much will income increase on this product?

Income will increase by $ _____

Answer 1

Salu c7,20,cea lprite Total Solr value 33,84 000 Produc lan:blin Maryin Sals Vale 33 94,0 Vavia ast2030, 400 Contrubuler 13,53, 600 Produi CaTribil Mar 1h = 13, 53,600 33, B4,000 40.1

.faint oud Cost Brear Even 2119 600 Salu Brean Suen ZI, 99,600 467,000 Margn o fpy Tn dillar Curvant Salu Beal Saky -33,4100m 2 l,84, 400 -2/Mr

Hexgi d Salelyalo CUYu Salu bca guen Pont ow Saby CUYnr ls lavc 32 94,000 35°/ 4Current Jn Lonet t pdur Conlnblio fixd Casr 19,840 1353,6c0 L473,760 Th Came Addtional narelo1 41376

118440 Saly L41316 Vwi't - 112440 S4.70 Additional 25, 20 0 Salu 1n(Ylaes by 55000 Unli Additional Cantibiio equal to add tioal Jn Cane S000 x Cort bukor 22000