Klein Company distributes a high-quality bird feeder that sells for $30 per unit
ID: 2491561 • Letter: K
Question
Klein Company distributes a high-quality bird feeder that sells for $30 per unit. Variable costs are $12 per unit, and fixed costs total $261,000 annually.
a)What is the product’s CM ratio?
cm ratio %
b)Use the CM ratio to determine the break-even point in sales dollars.
break even point in sales dollars
c)The company estimates that sales will increase by $57,000 during the coming year due to increased demand. By how much should operating income increase?
operating income increases by
Required: Answer the following independent questions:Explanation / Answer
Answer (a):
Answer (b):
Breakeven point in sales dollars = fixed cost/CM ratio
= $ 261,000/60%
= $ 156,600
Answer (c):
Operating income = sales - variable cost = (sales x (100-CM Ratio%)
= $ 57,000 x (100%-60%)
= $ 57,000 x 40%
Operating income increases by= $ 22,800
Srl. No. Particular Amount in $ 1 Sale price per unit 30 2 Variable cost per unit 12 3 =(1-2) Contribution per unit 18 4 = (3/1) CM Ratio = contribution/sales 60%Related Questions
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