Question

LUS Stem Annoucements CALCULATOR PRINTER VERSION RACE Exercise 3-13 Sunland Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The blankets retail for $46 throughout the country to loyal alumni of over 1,600 schools. Sunland's variable costs are 40% of sales; fixed costs are $120,000 per month Calculate contribution margin ratio. (Round ratio to 2 percentage places, ... 38 389.) Contribution margin ratio What is Sunland's annual breakeven point in sales dollars (use the rounded contribution margin ratio calated in the previous part to compute breakevensales.) Breakeven sales $ Sunland currently sells 131,000 blankets per year. If sales volume were to increase by 15%, by how much would operating income increase (Round answer to decimal places, eg. 5,275.) Operating incomes Assume that variable costs increase to 466 of the current sale price and fored costs increase by $14,500 per month of Sunland were to its sales price by 12% to cover these new costs, what would be the new annual breakeven point in sales de la Round sales price to decimal places... 52.75 and nalanswer to decimal places... 5,275) Breakeven sales $ Assume that variable costs increase to 46% of the current sales price and fed costs increase by $14.500 per month or Surtand were to use its sales price 12 to cover the number of blankets sold were to drop by what would be the new annual operating incomer (Round sales price to 2 decimal places .g. 52.75 and final answer to 5,275.) new costs, but the decimal places.. The new annual operating income If variable costs and fixed costs were to change as in part (d), would Sunland be better off raising selling price and losing volume or keeping the selling price $46 and selling 131,000 blankets Carhartve HIRL

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

A B Answer - Part 1) Contribution margin ratio = 100%-variable cost ratio = 100% -40% = 60% Thus the correct answer is contribution margin ratio = 60% : Part 2) Break even point in sales dollars = fixed cost / contribution margin ratio 0 = (120000*12)/60% 1 = $ 2400000 2 3 Thus the correct answer break even point in dollar sales = $ 2400000 5 Part 3) 5 Increase in operating income 7 = increase in unit sales * contribution margin per unit B = (131000*15%) *(46*60%) 9 = 19650*27.6 D = $ 542340 2 Thus the correct answer is increase in net operating income = $ 542340

F G H I А B C D E 4 Part 4) 5 Firstly we have to calculate the increased variable cost 6 = current sale price*46% 7 = 46*46% 3 = $ 21.16 o Contribution margin ratio = contribution margin at revised figures/ revised selling price *100 1 = ((46*1.12)-21.16)/(46*1.12)*100 2 = 58.92857% 4 Break even point in sales dollars = fixed cost / contribution margin ratio 5 = (134500*12)/58.92857% 6 = $ 2738909 3 Thus the correct answer break even point in dollar sales = $ 2738909 o Part 5) 1 Revised net operating income = decrease unit sales* revised contribution margin-fixed cost 2 = (131000*95%)*((46*1.12)-(46*46%)) - (134500*12) 3 = 124550*30.36 - 1614000 4 = $ 2167338 5 Thus the correct answer is $ 2167338