Question

In: Accounting

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.)

Expert Solution

1 ) Contribution margin ratio

Contribution margin ratio indicates relation contribution to sales so first find out total contribution.

Total Sales revenue	$ 291,000
Less: Variable cost	$247,350
Contribution margin	$ 43,650

Contribution margin ratio :

Contribution margin	$ 43,650
Divided by : Total Sales	$ 291,000
Contribution margin ratio	0.15 or 15%

= Contribution margin / Total Sales * 100

= $ 43,650 / $ 291,000 * 100

= 15 %

2) What is changes in net operating income ?

First find out present net operating income.

Explanation	Present sales	New sales
Total Sales	$ 291,000	$ 292,700
Less : Variable cost	$247,350	$ 248,795
Contribution margin	$ 43,650	$ 43,905
Less: Fixed cost	$ 38,800	$ 38,800
Net operating Income	$ 4,850	$ 5,105

So changes in net operating income is $ 255 ( $ 5,105 -$ ,4850)

In second method

After break even point contribution is equal to profit.

So Contribution = changes in sales * contribution margin ratio

= $ 1,700 *15 %

= $ 255 changes in net operating income

ekkarill92 answered 1 year 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 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?

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 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...

Frieden Company's contribution format income statement for last month is shown below: Sales (35,000 units) $...

Frieden Company's contribution format income statement for last month is shown below: Sales (35,000 units) $ 700,000 Variable expenses 490,000 Contribution margin 210,000 Fixed expenses 189,000 Operating income $ 21,000 Competition is intense, and Frieden Company’s profits vary considerably from one year to the next. Management is exploring opportunities to increase profitability. Required: 1. Frieden’s management is considering a major upgrade to the manufacturing equipment, which would result in fixed expenses increasing by $210,000 per month. However, variable expenses would...

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?