Question

Paulsen Company sells only one product. The regular selling price is $50. Variable costs are 70% of this selling price, and fixed costs are $7,500 per month Management decides to increase the selling price from $50 to $55 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision. 5 Refer to the above data. At the original selling price of $50 per unit, what is the contribution margin Refer to the above data. At the original selling price of $50 per unit, how many units must Paulsen sell to break even? Refer to the above data. At the original selling price of $50 per unit, what dollar volume of sales per month is required for Paulsen to earn a monthly operating income of $5,000? Refer to the above data. At the increased selling price of $55 per unit, what is the contribution margin ratio?

Answer 1

Requirement: 5 contribution margin variable cost Sales 50 Contribution margin 15 Contribution margin = Contribution margin ratio Net sales 100 50 100 = Contribution margin ratio 30% 15 Requirement: 6 Fixed cost 7500 = : Break-even-point (Units) Contribution margin per unit 15 Break even point 500 Requirement: 7 Bep Dollar sales Contribution Target profit margin ratio 5000 30% Fixed cost 7500 Bep Dollar sales 41667 1: 2007

Requirement: 8 Sales Contribution margin variable cost 35 Contribution margin 20 Contribution margin Contribution margin ratio Net sales 100 100 | = | Contribution margin ratio 36% 55