Original Data:
Selling Price per unit = $30.00
Variable Cost per unit = Variable Expenses / Number of units
sold
Variable Cost per unit = $226,800 / 12,600
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 = $169,200 / $12.00
Breakeven Point in unit sales = 14,100
Breakeven Point in dollar sales = Fixed Expenses / Contribution
Margin Ratio
Breakeven Point in dollar sales = $169,200 / 0.40
Breakeven Point in dollar sales = $423,000
Answer 2.
Increase in Sales = $88,000
Increase in Fixed Expenses = $6,300
Increase in Net Operating Income = Increase in Sales *
Contribution Margin Ratio - Increase in Fixed Expenses
Increase in Net Operating Income = $88,000 * 0.40 - $6,300
Increase in Net Operating Income = $28,900
Answer 3.
Selling Price per unit = $30.00 - 10% * $30.00
Selling Price per unit = $27.00
Fixed Expenses = $169,200 + $33,000
Fixed Expenses = $202,200
Number of units sold = 2 * 12,600
Number of units sold = 25,200
Net Operating Income (Loss) = Number of units sold * (Selling
Price per unit - Variable Cost per unit) - Fixed Expenses
Net Operating Income (Loss) = 25,200 * ($27.00 - $18.00) -
$202,200
Net Operating Income (Loss) = $24,600
Answer 4.
Variable Cost per unit = $18.00 + $0.60
Variable Cost per unit = $18.60
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $30.00 - $18.60
Contribution Margin per unit = $11.40
Required Unit Sales = (Fixed Expenses + Target Profit) /
Contribution Margin per unit
Required Unit Sales = ($169,200 + $4,500) / $11.40
Required Unit Sales = 15,237
Answer 5-a.
Variable Cost per unit = $18.00 - $3.00
Variable Cost per unit = $15.00
Fixed Expenses = $169,200 + $52,000
Fixed Expenses = $221,200
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 = $221,200 / $15.00
Breakeven Point in unit sales = 14,747
Breakeven Point in dollar sales = Fixed Expenses / Contribution
Margin Ratio
Breakeven Point in dollar sales = $221,200 / 0.50
Breakeven Point in dollar sales = $442,400
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 (13,300 units × $30 per unit) $ 399,000 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...
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 (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 (13,000 units X $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 390,000 234,000 156,000 174,000 $ (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...
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 x $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 258,000 154,800 103,200 115, 200 $ (12,000) Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president...