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PEM Inc. | ||
Calculation of Variable expense per unit | Amount $ | Note |
Variable expenses | 198,000.00 | A |
Units sold | 13,200.00 | B |
Variable expense per unit | 15.00 | C=A/B |
Answer 1 | Amount $ | |
Sales | 396,000.00 | D |
Contribution margin | 198,000.00 | E |
CM ratio | 50.00% | F=E/D |
Units sold | 13,200.00 | See B |
Contribution margin per unit | 15.00 | G=E/B |
Fixed expense | 220,500.00 | H |
Break even units | 14,700.00 | I=H/G |
Sell price | 30.00 | J |
Break even $ | 441,000.00 | K=I*J |
Answer 2 | ||
Increase in sales | 84,000.00 | L |
CM ratio | 50.00% | See F |
Increase in Contribution margin | 42,000.00 | M=L*F |
Less: Advertising expense | 6,100.00 | |
Increase in net operating income | 35,900.00 | |
Answer 3 | ||
Current Sell price | 30.00 | See J |
Reduction by 10% | 3.00 | N=J*10% |
Revised Sell price | 27.00 | O=J-N |
Current Sales units | 13,200.00 | See B |
Increase by 100% | 13,200.00 | P=B*100% |
Revised Sales units | 26,400.00 | Q=B+P |
Income statement | Amount $ | |
Sell Price | 27.00 | See O |
Less: Variable expenses | 15.00 | See C |
Contribution per unit | 12.00 | R |
Units sold | 26,400.00 | See Q |
Contribution margin | 316,800.00 | S=R*Q |
Less: Fixed expense | 220,500.00 | |
Less: Advertising expense | 31,000.00 | |
Operating Income | 65,300.00 | |
Answer 4 | ||
Current Contribution per unit | 15.00 | |
Less: packaging costs | 0.50 | |
Revised Contribution per unit | 14.50 | T |
Target Profit | 4,200.00 | |
Add: Fixed expense | 220,500.00 | |
Target Contribution | 224,700.00 | U |
Revised Contribution per unit | 14.50 | See T |
Units to be sold | 15,497.00 | V=U/T |
Workings for Answer 5 | ||
Current Variable cost per unit | 15.00 | |
Reduction by | 3.00 | |
Revised Variable cost per unit | 12.00 | W |
Current Fixed costs | 220,500.00 | |
Increase by | 55,000.00 | |
Revised Fixed costs | 275,500.00 | X |
Answer 5 a | Amount $ | Note |
Sell price | 30.00 | See J |
Less: Variable expenses | 12.00 | See W |
Contribution margin per unit | 18.00 | Y |
CM ratio | 60.00% | Z=Y/J |
Fixed expense | 275,500.00 | See X |
Break even units | 15,306.00 | AA=X/Y |
Break even $ | 459,180.00 | AB=AA*J |
Answer 5 b | Not Automated | Automated | Note |
Sell Price | 30.00 | 30.00 | See J |
Less: Variable expenses | 15.00 | 12.00 | See C, W |
Contribution per unit | 15.00 | 18.00 | AC |
Units sold | 20,000.00 | 20,000.00 | AD |
Contribution margin | 300,000.00 | 360,000.00 | AE=AC*AD |
Less: Fixed expense | 220,500.00 | 275,500.00 | See H, X |
Operating Income | 79,500.00 | 84,500.00 | |
Increase in Operating Income by | 5,000.00 |
Answer 5 c |
If automation is done then operating income will increase by $ 5,000 so yes the 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 (13,200 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 (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...
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 $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 585,000 409,500 175,500 180,000 $ (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: 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 (12,900 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...
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 (13,000 units * $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 390,000 195,000 195,000 217,500 $ (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 (13,200 units * $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 (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 (13,200 units * $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 396,000 198,000 198,000 229,500 $ (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...