Waterways Continuing Problem 19 Vice President for Sales and Marketing Sam Totte
ID: 2466471 • Letter: W
Question
Waterways Continuing Problem 19
Vice President for Sales and Marketing Sam Totter is trying to plan for the coming year in terms of production needs to meet the sales demand. He is also trying to determine ways in which the company’s profits might be increased in the coming year.
Waterways markets a simple water control and timer that it mass-produces. During 2016, the company sold 696,000 units at an average selling price of per solution $4.20 per unit. The variable expenses were $1,900,080, and the fixed expenses were $683,256.
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Waterways Continuing Problem 19
Vice President for Sales and Marketing Sam Totter is trying to plan for the coming year in terms of production needs to meet the sales demand. He is also trying to determine ways in which the company’s profits might be increased in the coming year.
Waterways markets a simple water control and timer that it mass-produces. During 2016, the company sold 696,000 units at an average selling price of per solution $4.20 per unit. The variable expenses were $1,900,080, and the fixed expenses were $683,256.
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Explanation / Answer
Information as required is calculated as under:
Waterways Contribution Margin Income Statement Particulars Units Per unit Total Amount ($) Sales 6,96,000 4.2 29,23,200 Variable Costs 6,96,000 2.73 19,00,080 Contribution Margin 6,96,000 1.47 10,23,120 Fixed Costs 6,83,256 Net Profit 3,39,864 Contribution Margin Ratio = Contribution Margin/Sales 0.35 35% Break even point in units (Fixed Cost/Cont Margin) 4,64,800 Break even point in dollars (Fixed Cost/Cont Margin ratio) 19,52,160 Margin of safety in dollars (Sales - Breakeven sales) 9,71,040 Margin of safety in ratio (Margin of safety/Sales) 33% Target Profit 3,73,850 Sales level required in units (Target Profit + Fixed expenses)/ CM 7,19,120 7,19,120Related Questions
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