Question

In: Accounting

Last month when Holiday Creations, Inc., sold 50,000 units, total sales were $200,000, total variable expenses...

Last month when Holiday Creations, Inc., sold 50,000 units, total sales were $200,000, total variable expenses were $120,000, and fixed expenses were $65,000.

Required:

1. What is the company’s contribution margin (CM) ratio?

2. What is the estimated change in the company’s net operating income if it can increase sales volume by 250 units and total sales by $1,000?

Expert Solution

Answer:

Sale price per unit = Total Sales / Total no. of units = $200,000 / 50,000 units = $4 per unit

Variable cost per unit = Total Variable cost / Total no. of units = $120,000 / 50,000 units = $2.4 per unit

1. Contribution Margin ratio

Contribution Margin = Sales - Variable expenses = $200,000 - $120,000 = $80,000

Contribution Margin ratio = (Contribution Margin / Sales) * 100

= ($80,000 / $200,000) * 100

= 40%

2. Estimated change in the company’s net operating income if Sales volume is increased by 250 units and sales by $1,000

Total units sold = 50,000 units + 250 units = 50,250 units

Revised Total Sales = $201,000 ($200,000 + [250 units * $4])

Revised Variable cost = 50,250 units * $2.4 per unit = $120,600

Fixed cost wil remain same i.e., $65,000

Estimated change in the company’s net operating income = $400 ($15,400 - $15,000)

ekkarill92 answered 2 years ago

Last month when Holiday Creations, Inc., sold 43,000 units, total sales were $172,000, total variable expenses...

Last month when Holiday Creations, Inc., sold 43,000 units, total sales were $172,000, total variable expenses were $130,720, and fixed expenses were $37,200. Required: 1. What is the company’s contribution margin (CM) ratio? 2. What is the estimated change in the company’s net operating income if it can increase sales volume by 450 units and total sales by $1,800? (Do not round intermediate calculations.)

Last month when Holiday Creations, Inc., sold 44,000 units, total sales were $176,000, total variable expenses...

Last month when Holiday Creations, Inc., sold 44,000 units, total sales were $176,000, total variable expenses were $128,480, and fixed expenses were $39,300. Required: 1. What is the company’s contribution margin (CM) ratio? 2. What is the estimated change in the company’s net operating income if it can increase sales volume by 600 units and total sales by $2,400? (Do not round intermediate calculations.)

Last month when Holiday Creations, Inc., sold 37,000 units, total sales were $301,000, total variable expenses...

Last month when Holiday Creations, Inc., sold 37,000 units, total sales were $301,000, total variable expenses were $219,730, and fixed expenses were $36,400. Required: 1. What is the company’s contribution margin (CM) ratio? 2. What is the estimated change in the company’s net operating income if it can increase total sales by $1,700? (Do not round intermediate calculations.)

Last month when Holiday Creations, Inc., sold 35,000 units, total sales were $291,000, total variable expenses...

Last month when Holiday Creations, Inc., sold 35,000 units, total sales were $291,000, total variable expenses were $247,350, and fixed expenses were $38,800. Required: 1. What is the company’s contribution margin (CM) ratio? 2. What is the estimated change in the company’s net operating income if it can increase total sales by $1,700? (Do not round intermediate calculations.)

Last month when Holiday Creations, Inc., sold 36,000 units, total sales were $289,000, total variable expenses...

Last month when Holiday Creations, Inc., sold 36,000 units, total sales were $289,000, total variable expenses were $239,870, and fixed expenses were $36,500. Required: 1. What is the company’s contribution margin (CM) ratio? 2. Estimate the change in the company’s net operating income if it were to increase its total sales by $1,700.

1). Contribution Margin is: a). Sales - Total Variable expenses b). Sales - Total variable expenses...

1). Contribution Margin is: a). Sales - Total Variable expenses b). Sales - Total variable expenses - Total fixed expenses c). Sales revenue per unit x Sales quantity d). Variable expense per unit x Sales quantity 2). When preparing segmented income statements fixed expense are separated into the following categories: a). Traceable and common b).Fixed and Variable c).Direct and indirect d).Product and period 3).A Co. reported: Sales $125000; Contribution margin $62000; Total fixed expenses $42000; Common fixed expenses $15000. How...

Pearson Company sold 5,000 units for $50 each. Variable costs were $28 per unit and total fixed expenses were $20,350.

__________________________________________________________________________ Pearson Company sold 5,000 units for $50 each. Variable costs were $28 per unit and total fixed expenses were $20,350. What is Pearson's total contribution margin? What is the breakeven in terms of units for Pearson? What is Pearson's net income? __________________________________________________________________________ Ava’s Creations sells two products. A and B. The weighted average per unit is $40 and Ava’s fixed costs are $24,800. The sales mix is 30% for A and 70% for B. How many units of...

Sales (4,000 units) $200,000 Variable expenses 110,000 Contribution margin 90,000 Fixed expenses 48,000 Net operating income...

Sales (4,000 units) $200,000 Variable expenses 110,000 Contribution margin 90,000 Fixed expenses 48,000 Net operating income $42,000 A)What is the contribution margin per unit? B)What is the contribution margin ratio? C)What is the variable expense ratio? D) If sales increase to 6,050 units, what would be the estimated net operating income? E) If the selling price decreases by $4 per unit and the sales volume increases by 200 units, what would be the estimated net operating income? F) If the...

The current sales of a company are 5000 units at $65 per unit. Total variable expenses...

The current sales of a company are 5000 units at $65 per unit. Total variable expenses and fixed expenses are $200,000 and $104,800 respectively. If sales unit increase by 4% and fixed expenses remain unchanged, estimate the percentage change in net operating income. a. 80.16% b. 24.75% c. 25% d. 4%

Jason, Inc. sold 90,000 units last year for $2.50 each. Variable costs per unit were $0.30...

Jason, Inc. sold 90,000 units last year for $2.50 each. Variable costs per unit were $0.30 for direct materials, $0.50 for direct labor, and $0.30 for variable overhead. Fixed costs were $60,000 in manufacturing overhead and $40,000 in nonmanufacturing costs. a. What is the total contribution margin? b. What is the unit contribution margin? c. What is the contribution margin ratio? d. If sales increase by 15,000 units, by how much will profits increase?