connect.htm Company is the exclusive distributor for an automotive product that
ID: 2566634 • Letter: C
Question
connect.htm Company is the exclusive distributor for an automotive product that sells tor $56 00 per unit and has a CM ratio of 30% The company's fixed expenses are $411600 per year The company plans to sell 29,300 units this year Required: 1 What are the vaniable expenses per unit? 2 What is the break-even point in unit sales and in dollar sales? 3 What amount of unit sales and dollar sales is required to attain a target profit of $243 600 per year? 4 Assume that by using a more efficient shipper, the company is able to reduce its company's new break-even point in unit sales and in dollar sales? variable expenses by 55 60 per unit. What is the Variable expense Bneak-eves point in unts Break-even point in dolar sales 3 lund sales needed to stan target putt ales needed to attaih target proft Deller sales needed to attin target proft KPxex 26 ofns ROExplanation / Answer
Contribution margin ratio = 20%
Contribution margin = 20% of sales = 20% × $56.00 = $11.20
Sales = $56.00
Fixed expenses = $411,600
1. Variable expense per unit = Sales - Contribution margin = 56.00-11.20 = $44.80
2. Break even point in units = Fixed expenses ÷ Contribution margin = 411,600÷11.20 = 36,750 units
Break even point in dollar sales = Fixed expenses × Sales ÷ Contribution margin = 411,600×56.00÷11.20 = $2,058,000
3. Target profit = $243,600
Unit sales to attain target profit = (Fixed expenses + Target profit) ÷ Contribution margin = (411,600+243,600)÷11.20 = 655,200÷11.20 = 58,500 units
Dollar sales to attain target profit = (Fixed expenses + Target profit) × Sales ÷ Contribution margin = (411,600+243,600)×56.00÷11.20 = 655,200×56.00÷11.20 = $3,276,000
4. New variable expenses = 44.80-5.60 = $39.20 per unit
New Contribution margin = Sales - Variable expenses = 56.00-39.20 = $16.80
New break even point in units = Fixed expenses ÷ New Contribution margin = 411,600÷16.80 = 24,500 units
New break even point in dollars = Fixed expenses × Sales ÷ New Contribution margin = 411,600×56.00÷16.80 = $1,372,000
Dollar sales needed to attain target profit = (Fixed expenses + Target profit) × Sales ÷ New Contribution margin = (411,600+243,600)×56.00÷16.80 = 655,200×56.00÷16.80 = $2,184,000
1 Variable $44.80 2 Break even point in units 36,750 units Break even point in dollars $2,058,000 3 Units sales needed to attain target profit 58,500 units Dollar sales needed to attain target $3,276,000 4 New break even point in units 24,500 units New break even point in dollars $1,372,000 Dollar sales needed to attain target profit $2,184,000Related Questions
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