Homework Answers
a) Expected Volume - 600,000 units
Current
Budgeted Profit = (Contribution Margin * 600,000) - $610,000 = [(4.5 - 2.4) * 600,000] - $610,000 = $650,000
New
Budgeted Profit = (Contribution Margin * 600,000) - $610,000 = [(4.5 - 1.2) * 600,000] - $1,110,000 = $870,000
b) Expected Volume - 300,000 units
Current
Budgeted Profit = (Contribution Margin * 300,000) - $610,000 = [(4.5 - 2.4) * 300,000] - $610,000 = $20,000
New
Budgeted Profit = (Contribution Margin * 300,000) - $610,000 = [(4.5 - 1.2) * 300,000] - $1,110,000 = ($120,000)
c) Expected Volume - 900,000 units
Current
Budgeted Profit = (Contribution Margin * 900,000) - $610,000 = [(4.5 - 2.4) * 900,000] - $610,000 = $1,280,000
New
Budgeted Profit = (Contribution Margin * 900,000) - $610,000 = [(4.5 - 1.2) * 900,000] - $1,110,000 = $1,860,000
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