Original Data:
Selling Price per unit = $20.00
Variable Cost per unit = Variable Expenses / Number of units
sold
Variable Cost per unit = $135,000 / 13,500
Variable Cost per unit = $10.00
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $20.00 - $10.00
Contribution Margin per unit = $10.00
Answer 1.
Contribution Margin Ratio = Contribution Margin per unit /
Selling Price per unit
Contribution Margin Ratio = $10.00 / $20.00
Contribution Margin Ratio = 50%
Breakeven Point in unit sales = Fixed Expenses / Contribution
Margin per unit
Breakeven Point in unit sales = $150,000 / $10.00
Breakeven Point in unit sales = 15,000
Breakeven Point in dollar sales = Fixed Expenses / Contribution
Margin Ratio
Breakeven Point in dollar sales = $150,000 / 0.50
Breakeven Point in dollar sales = $300,000
Answer 2.
Increase in Sales = $89,000
Increase in Fixed Expenses = $6,100
Increase in Net Operating Income = Increase in Sales *
Contribution Margin Ratio - Increase in Fixed Expenses
Increase in Net Operating Income = $89,000 * 0.50 - $6,100
Increase in Net Operating Income = $38,400
Answer 3.
Selling Price per unit = $20.00 - 10% * $20.00
Selling Price per unit = $18.00
Fixed Expenses = $150,000 + $37,000
Fixed Expenses = $187,000
Number of units sold = 2 * 13,500
Number of units sold = 27,000
Net Operating Income (Loss) = Number of units sold * (Selling
Price per unit - Variable Cost per unit) - Fixed Expenses
Net Operating Income (Loss) = 27,000 * ($18.00 - $10.00) -
$187,000
Net Operating Income (Loss) = $29,000
Answer 4.
Variable Cost per unit = $10.00 + $0.60
Variable Cost per unit = $10.60
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $20.00 - $10.60
Contribution Margin per unit = $9.40
Required Unit Sales = (Fixed Expenses + Target Profit) /
Contribution Margin per unit
Required Unit Sales = ($150,000 + $4,200) / $9.40
Required Unit Sales = 16,404
Answer 5-a.
Variable Cost per unit = $10.00 - $3.00
Variable Cost per unit = $7.00
Fixed Expenses = $150,000 + $56,000
Fixed Expenses = $206,000
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $20.00 - $7.00
Contribution Margin per unit = $13.00
Contribution Margin Ratio = Contribution Margin per unit /
Selling Price per unit
Contribution Margin Ratio = $13.00 / $20.00
Contribution Margin Ratio = 65%
Breakeven Point in unit sales = Fixed Expenses / Contribution
Margin per unit
Breakeven Point in unit sales = $206,000 / $13.00
Breakeven Point in unit sales = 15,846
Breakeven Point in dollar sales = Fixed Expenses / Contribution
Margin Ratio
Breakeven Point in dollar sales = $206,000 / 0.65
Breakeven Point in dollar sales = $316,923
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 (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 (12,800 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 (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 (13,300 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 * $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 (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 (12,788 units * $38 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 381, ea 228.688 152,4ee 170,400 $ (18,eee) 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 (13,200 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 (13,200 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 (12,600 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...