Question
In: Accounting
question 1- Nice Corporation produces and sells a single product. Data concerning that product appear below:...
question 1- Nice Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 200 100 % Variable expenses 40 20 % Contribution margin $ 160 80 % Fixed expenses are $120,000 per month. The company is currently selling 1,300 units per month.
Required: Management is considering using a new component that would increase the unit variable cost by $49. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected?
question 2 - Jelly Inc.'s contribution margin ratio is 62% and its fixed monthly expenses are $50,500. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $143,000?
question 3 -
The contribution margin ratio of Candle Corporation's only product is 60%. The company's monthly fixed expense is $455,700 and the company's monthly target profit is $41,700.
Required:
Determine the dollar sales to attain the company's target profit.
Solutions
Expert Solution
| Question 1 : | |
| At present | |
| Sales [ 1300 * 200 ] | 260000 |
| (-) Variable costs [ 1300 * 40 ] | 52000 |
| Contribution margin | 208000 |
| (-) Fixed costs | 120000 |
| Net operating income | 88000 |
| After change | |
| Sales [ (1300+500) * 200 ] | 360000 |
| (-) Variable costs [ (1300+500) * (40+49) ] | 160200 |
| Contribution margin | 199800 |
| (-) Fixed costs | 120000 |
| Net operating income | 79800 |
| Net operating income after change | 79800 |
| (-) Net operating income at present | 88000 |
| Decrease in net operating income | -8200 |
| The net operating income will decrease by $8,200 |
| Question 2 : | |
| Sales | 143000 |
| (*) Contribution margin ratio | 62% |
| Contribution margin | 88660 |
| (-) Fixed expenses | 50500 |
| Net operating income | 38160 |
| Question 3 : | |
| Dollar sales to attain the company's target profit = ( Fixed expenses + Target profit ) / Contribution margin ratio = ( 455700 + 41700 ) / 60% = | 829000 |
ekkarill92 answered 2 years agoRelated Solutions
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Units
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