Original Data:
Selling Price per unit = $30.00
Variable Cost per unit = Variable Expenses / Number of units
sold
Variable Cost per unit = $199,500 / 13,300
Variable Cost per unit = $15.00
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
Answer 1.
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 = $222,000 / $15.00
Breakeven Point in unit sales = 14,800
Breakeven Point in dollar sales = Fixed Expenses / Contribution
Margin Ratio
Breakeven Point in dollar sales = $222,000 / 0.50
Breakeven Point in dollar sales = $444,000
Answer 2.
Increase in Sales = $88,000
Increase in Fixed Expenses = $6,400
Increase in Net Operating Income = Increase in Sales *
Contribution Margin Ratio - Increase in Fixed Expenses
Increase in Net Operating Income = $88,000 * 0.50 - $6,400
Increase in Net Operating Income = $37,600
Answer 3.
Selling Price per unit = $30.00 - 10% * $30.00
Selling Price per unit = $27.00
Fixed Expenses = $222,000 + $38,000
Fixed Expenses = $260,000
Number of units sold = 2 * 13,300
Number of units sold = 26,600
Net Operating Income (Loss) = Number of units sold * (Selling
Price per unit - Variable Cost per unit) - Fixed Expenses
Net Operating Income (Loss) = 26,600 * ($27.00 - $15.00) -
$260,000
Net Operating Income (Loss) = $59,200
Answer 4.
Variable Cost per unit = $15.00 + $0.60
Variable Cost per unit = $15.60
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $30.00 - $15.60
Contribution Margin per unit = $14.40
Required Unit Sales = (Fixed Expenses + Target Profit) /
Contribution Margin per unit
Required Unit Sales = ($222,000 + $4,700) / $14.40
Required Unit Sales = 15,743
Answer 5-a.
Variable Cost per unit = $15.00 - $3.00
Variable Cost per unit = $12.00
Fixed Expenses = $222,000 + $51,000
Fixed Expenses = $273,000
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $30.00 - $12.00
Contribution Margin per unit = $18.00
Contribution Margin Ratio = Contribution Margin per unit /
Selling Price per unit
Contribution Margin Ratio = $18.00 / $30.00
Contribution Margin Ratio = 60%
Breakeven Point in unit sales = Fixed Expenses / Contribution
Margin per unit
Breakeven Point in unit sales = $273,000 / $18.00
Breakeven Point in unit sales = 15,167
Breakeven Point in dollar sales = Fixed Expenses / Contribution
Margin Ratio
Breakeven Point in dollar sales = $273,000 / 0.60
Breakeven Point in dollar sales = $455,000
Answer 5-b.
Answer 5-c.
Yes, company should automate its operations
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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 (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 (12,800 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: points (8 03:40:59 Sales (12,900 units * $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....
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 (12,600 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...