26% n Visualización Historial Marcadores Ventana Ayuda Help Save & Exit Check n
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26% n Visualización Historial Marcadores Ventana Ayuda Help Save & Exit Check n Due to erratic sales of its sole product-a higheapacity 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 (13,400 units$20 per unit) Variable expenses 268,000 160,800 107,200 Contribution margin Fixed expenses Net operating loss (12,000) Required 1 Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,500 increase in the monthly advertising budget combined with an intensified effort by the sales staft, will result in an $82000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company's monthly net operating income? 3. Refer $39,000 in the monthly advertising budget, income (loss)? to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of will double unit sales. if the sales manager is right, what will be the revised net operating ment thinks that a fancy new package for the laptop computer battery would grow 4 Refer to the original deta the ng costs by 0.60 cents per unit. Assuming no other changes, how many units would sales. The new package would increase packaging have to be sold each month to attain a target profit of $5,000? 5. Refer to the original data. By automating, c would increase by $51,000 each month. a. Compute the company could reduce variable expenses by $3 per unit. However fixed expenses the new CM ratio and the new break-even point in unit sales and dollar sales expects to sell 20.500 units next month. Prepare two contribution format income statements, one one assuming that they are (Show data on a per unit and percentage basis, as well as in total, for each altemative ) Would you recommend that he company automate ts operations (Assuming that the company expects to sell 20.s00p t is the net oneratinn incnme? MacBook AirExplanation / Answer
1. CM ratio = Contribution/Sales x 100
CM ratio = $ 107,200/ $ 268,000 x 100
CM Ratio = 40%
Break Even Point in dollars = Fixed Cost / CM Ratio
Break Even Point in dollars = $ 119,200/40%
Break Even Sales ($) = $ 298,000
Break Even Point (units) = $ 298,000 / $20 = 14,900 units.
2. Additional fixed cost of monthly advertising budget is $6,500, Increase in monthly sales is $82,000.
Revised Sales = $ 268,000 + $ 82,000 = $ 350,000
Contribution = $ 350,000 x 40% = $ 140,000
Total Fixed expenses = $ 119,200 + additional advertising budget
Total Fixed expenses = $ 119,200 + $ 6,500 = $ 125,700
Net Operating Income = Contribution - Total Fixed expenses
Net Operating Income = $ 140,000 - $ 125,700 = $ 14,300
Therefore, if the president is right, there would be $ 14,300 increase in the company's monthly net operating income.
3. If there is 10% decrease in the selling price combined with $ 39,000 increase in monthly advertising budget, sales units would be doubled.
From the given data, variable expense per unit = $ 160,800 /13,400 units = $ 12 per unit.
If there is 10% reduction in the selling price, new selling price = $20 x 90% = $ 18per unit.
Variable cost per unit = $ 12 per unit.
Contribution = $ 18 - $ 12 = $ 6 per unit.
No. of units to be sold = 13,400 x 2 = 26,800 units.
Total revised fixed costs = $ 119,200 + $ 39,000 = $ 158,200
Revised total contribution = $ 6 x 26,800 units = $ 160,800
Net Operating Income = Contribution - Fixed expenses
Net Operating Income = $ 160,800 - $ 158,200
Net Operating Income = $ 2,600. If the sales manager is right, the revised net operating income would be $ 2,600.
4. New package costs = $0.60 per unit;
Existing variable cost per unit = $ 12
Revised Variable cost per unit = $ 12.60 per unit.
Selling Price = $ 20 per unit.
Contribution = $20 - $12.60 = $7.40 per unit.
CM Ratio = $7.40/$20 x 100 = 37%
Target Profit = $5,000; Fixed Expenses = $ 119,200
Total No. of units to be sold to acheive the target profit = (Fixed expenses + Target Profit)/CM Ratio
No. of units to be sold = ($5,000 + $119,200)/$ 7.40
No. of units to be sold = $124,200/$7.4
No. of units to be sold = 16,783.78 units.
If 16,783.78 units are sold each month, profit of $5,000 can be attained.
Hope this is helpful!!
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