Original Data:
Selling Price per unit = $30.00
Variable Cost per unit = Variable Expenses / Number of units
sold
Variable Cost per unit = $234,000 / 13,000
Variable Cost per unit = $18.00
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $30.00 - $18.00
Contribution Margin per unit = $12.00
Answer 1.
Contribution Margin Ratio = Contribution Margin per unit /
Selling Price per unit
Contribution Margin Ratio = $12.00 / $30.00
Contribution Margin Ratio = 40%
Breakeven Point in unit sales = Fixed Expenses / Contribution
Margin per unit
Breakeven Point in unit sales = $174,000 / $12.00
Breakeven Point in unit sales = 14,500
Breakeven Point in dollar sales = Fixed Expenses / Contribution
Margin Ratio
Breakeven Point in dollar sales = $174,000 / 0.40
Breakeven Point in dollar sales = $435,000
Answer 2.
Increase in Sales = $88,000
Increase in Fixed Expenses = $6,700
Increase in Net Operating Income = Increase in Sales *
Contribution Margin Ratio - Increase in Fixed Expenses
Increase in Net Operating Income = $88,000 * 0.40 - $6,700
Increase in Net Operating Income = $28,500
Answer 3.
Selling Price per unit = $30.00 - 10% * $30.00
Selling Price per unit = $27.00
Fixed Expenses = $174,000 + $30,000
Fixed Expenses = $204,000
Number of units sold = 2 * 13,000
Number of units sold = 26,000
Net Operating Income (Loss) = Number of units sold * (Selling
Price per unit - Variable Cost per unit) - Fixed Expenses
Net Operating Income (Loss) = 26,000 * ($27.00 - $18.00) -
$204,000
Net Operating Income (Loss) = $30,000
Answer 4.
Variable Cost per unit = $18.00 + $0.50
Variable Cost per unit = $18.50
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $30.00 - $18.50
Contribution Margin per unit = $11.50
Required Unit Sales = (Fixed Expenses + Target Profit) /
Contribution Margin per unit
Required Unit Sales = ($174,000 + $4,400) / $11.50
Required Unit Sales = 15,513
Answer 5-a.
Variable Cost per unit = $18.00 - $3.00
Variable Cost per unit = $15.00
Fixed Expenses = $174,000 + $58,000
Fixed Expenses = $232,000
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $30.00 - $15.00
Contribution Margin per unit = $15.00
Contribution Margin Ratio = Contribution Margin per unit /
Selling Price per unit
Contribution Margin Ratio = $15.00 / $30.00
Contribution Margin Ratio = 50%
Breakeven Point in unit sales = Fixed Expenses / Contribution
Margin per unit
Breakeven Point in unit sales = $232,000 / $15.00
Breakeven Point in unit sales = 15,467
Breakeven Point in dollar sales = Fixed Expenses / Contribution
Margin Ratio
Breakeven Point in dollar sales = $232,000 / 0.50
Breakeven Point in dollar sales = $464,000
Answer 5-b.
Answer 5-c.
Yes, company should automate its operations
Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Inc., has been...
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 * $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 393,000 235,800 157,200 175, 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...
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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 $256,000 153,600 102,480 114,400 $(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 that a...
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...
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 $585,00e 409,50e 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 believes that...
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: $ 399,000 239,400 159,600 177,600 Sales (13,300 units x $30 per unit) Variable expenses Contribution margin Fixed expenses $ (18,000) Net operating loss Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes...