Solution 1:
CM ratio = Contribution margin / Sales = $100,800 / $252,000 = 40%
break-even point in unit sales = Fixed expenses / CM per unit = $112,800 / $8 = 14100 units
Break even point in dollar sales = Fixed expenses / CM ratio = $112,800 / 40% = $282,000
Solution 2:
increase (decrease) in the company’s monthly net operating income = Increase in contribution margin - Increase in advertising expenses
= ($88,000*40%) - $6,800 = $28,400
Solution 3:
New selling price per unit = $20*90% = $18
New CM per unit = $8 - $2 = $6 per unit
New fixed costs =$112,800 + $38,000 = $150,800
New sales volume = 12600*2 = 25200 units
New operating income = Contribution margin - Fixed costs = (25200*$6) - $150,800 = $400
Solution 4:
New contribution margin per unit = $8 - $0.70 = $7.30 per unit
Target income = $4,200
Nos of units to be sold to attain target profit = (Fixed cost + Net operating income) / CM per unit
= ($112,800 + $4,200) / $7.30 = 16027 units
Solution 5a:
New CM per unit = $8 +$3 = $11 per unit
New fixed costs = $112,800 + $52,000 = $164,800
New CM ration = $11 / $20 = 55%
New break even point in units = $164,800 / $11 = 14982 units
Breakeven point in dollar sales = $164,800 /55% = $299,636
Solution 5b:
Contribution format income statement - Operation Automated | |||
Particulars | Per unit | % | Total |
Sales | $20.00 | 100% | $418,000.00 |
Variable costs | $9.00 | 45% | $188,100.00 |
Contribution margin | $11.00 | 55% | $229,900.00 |
Fixed costs | $164,800.00 | ||
Net operating income | $65,100.00 |
Contribution format income statement - Operation not Automated | |||
Particulars | Per unit | % | Total |
Sales | $20.00 | 100% | $418,000.00 |
Variable costs | $12.00 | 60% | $250,800.00 |
Contribution margin | $8.00 | 40% | $167,200.00 |
Fixed costs | $112,800.00 | ||
Net operating income | $54,400.00 |
Solution 5c:
Yes, it is recommended company should automate its operations
Help solving 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: 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 $ 396,000 237,600 158, 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 (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 (12,800 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 (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 (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...
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 (12,900 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...
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 * $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 252,000 151,200 100,800 112,800 $ (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 $ 396,000 198,000 198,000 229,500 $ (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...