Question

assume that variable cost increase to 45% of the current sales price and fix costs increase by $12,000 per month. If Sunland were to raise its sales price 10% to cover these new costs, but the number of blankets sold were to drop by 6% what would be the new annual operating income?

h 3: Homework Question 3 of 4 4.17/5.25 View Policies Show Attempt History Current Attempt in Progress Sunland Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The blankets retail for $50 throughout the country to loyal alumni of over 3,000 schools. Sunland's variable costs are 43% of sales, fixed costs are $114.000 per month. (a1) Your answer is correct. Calculate contribution margin ratio. (Round ratio to 2 percentage places. e.3.0.38 - 38%.) 57 26 Contribution margin ratio eTextbook and Media Attempts: 1 of 12 used

Answer 1

Solution ) Sales ($ 50 x 1.1) less: Variable cost ($ 50 x 45%) Contribution Margin Contribution Margin % $ $ 55.00 22.50 32.50 59.09% (32.50 / 55) New Fixed Cost II II $114,000 + $12,000 $ 1,26,000 Break even Sales Fixed Cost / Contrubution % $ 1,26,000 / 59.09% $ 2,13,231 = or Break even Sales (Fixed Cost / Contribution per unit) x Sale price $ 1,26,000 / 32.50 x $55 3,877 units x $ 55 $ 2,13,235 $ Solution d) Contribution Margin Revised No of Blankets ( 106,000 blankets x 94%) Revised Contribution less: Fixed Costs ($ 114,000 + $ 12,000) The new Annual Operating Income $ $ $ 32.50 per unit 99640 blankets 32,38,300 1,26,000 31,12,300

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