Req 1 : | |
Contribution margin per unit = Contribution margin / Units sold = 159600 / 13300 | 12 |
Contribution margin ratio = Contribution margin / Sales = 159600 / 399000 | 40% |
Break-even point in units = Fixed expenses / Contribution margin per unit = 177600 / 12 | 14800 |
Break-even point in dollars = Fixed expenses / Contribution margin ratio = 177600 / 40% | 444000 |
Req 2 : | |
Increase in Contribution margin ( Increase in sales * Contribution margin ratio = 88000 * 40% ) | 35200 |
(-) Increase in advertising budget | 6300 |
Increase (decrease) in net operating income | 28900 |
Increase in monthly net operating income | 28900 |
Req 3 : | |
Revised selling price = Current selling price * ( 1 - % reduction ) = 30 * ( 1 - 10% ) | 27 |
Current unit variable cost = Variable expenses / Units sold = 239400 / 13300 | 18 |
Revised fixed costs = Current fixed costs + Increase in advertising expense = 177600 + 39000 | 216600 |
Revised sales units = Current sales units * 2 = 13300 * 2 | 26600 |
Sales ( 26600 * 27 ) | 718200 |
(-) Variable expenses ( 26600 * 18 ) | 478800 |
Contribution margin | 239400 |
(-) Fixed expenses | 216600 |
Net operating income (loss) | 22800 |
Req 4 : | |
Revised unit variable cost = Current unit variable cost + 0.70 = 18 + 0.70 | 18.70 |
Units sales to attain target profit = ( Target profit + Fixed expenses ) / ( Selling price - Unit variable cost ) = ( 4100 + 177600 ) / ( 30 - 18.70 ) | 16080 |
Req 5A : | |
Current unit variable cost = Variable expenses / Units sold = 239400 / 13300 | 18 |
Revised unit variable cost = 18 - 3 | 15 |
Revised fixed expenses = 177600 + 54000 | 231600 |
Contribution margin per unit = Selling price - Unit variable cost = 30 - 15 | 15 |
CM ratio = Contribution margin per unit / Selling price = 15 / 30 | 50% |
Break-even point in unit sales = Fixed costs / Contribution margin per unit = 231600 / 15 | 15440 |
Break even point in dollar sales = Fixed costs / CM ratio = 231600 / 50% | 463200 |
Req 5B : | ||||||
Not automated | Automated | |||||
Total | Per unit | % | Total | Per unit | % | |
Sales | 624000 | 30 | 100% | 624000 | 30 | 100% |
Variable expenses | 374400 | 18 | 60% | 312000 | 15 | 50% |
Contribution margin | 249600 | 12 | 40% | 312000 | 15 | 50% |
Fixed expenses | 177600 | 231600 | ||||
Net operating income | 72000 | 80400 |
Req 5C : |
Answer : Yes |
Explanation : If the company sells 20800 units, then the company will earn more net operating income if it automates its operations. |
3.33 points Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Inc.,...
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. S585.000 Sales (19,500 units * $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss 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...
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 $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 384,000 192,000 192,000 214,500 $ (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 (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...
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 X. $399,000 $30 per unit) Variable expenses 239,400 Contribution margin 159,600 Fixed expenses 177,600 Net operating loss $ (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...
5B: 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 x $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...
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 (12,800 units * $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 256,000 153,600 102,400 114,400 $ (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 (13,100 units X $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 262,000 131,000 131,000 146,000 $ (15,000) 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 (12,700 units X $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 381,000 228,600 152,400 170,400 $ (18,000) Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president 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 X $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...