Question
In: Accounting
A company’s contribution format income statement for the most recent month is given below: Sales...
A company’s contribution format income statement for the most recent month is given below:
| Sales (13,200 units × $30 per unit) | $ | 396,000 | |
| Variable expenses | 198,000 | ||
| Contribution margin | 198,000 | ||
| Fixed expenses | 220,500 | ||
| Net operating loss | $ | (22,500 | ) |
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 $6,200 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $87,000 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 to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $34,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)?
4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by $0.40 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,200?
5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $57,000 each month.
a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.
b. Assume that the company expects to sell 20,700 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.)
c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,700)?
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Miller Company’s contribution format income statement for the most recent month is shown below: Sales (37,000...
Miller Company’s contribution format income statement for the
most recent month is shown below:
Sales (37,000 units)
$
259,000
$
7.00
Variable expenses
148,000
4.00
Contribution margin
111,000
$
3.00
Fixed expenses
42,000
Net operating income
$
69,000
Consider each case independently):
1. What is the revised net operating income if unit sales
increase by 19%?
2. What is the revised net operating income if the selling price
decreases by $1.40 per unit and the number of units sold increases...
A company’s contribution format income statement for last month is given below: Sales (40,000 units ×...
A company’s contribution format income statement for last month
is given below:
Sales (40,000 units × $22 per unit)
$
880,000
Variable expenses
616,000
Contribution margin
264,000
Fixed expenses
211,200
Net operating income
$
52,800
The company considers renovating its operations by purchasing a
new machine that would reduce variable expenses by $6.60 per unit.
However, fixed expenses would increase to a total of $475,200 each
month. Using the new machine would not cause a change in monthly
sales quantity...
Miller Company’s contribution format income statement for the most recent month is shown below: Total Per...
Miller Company’s contribution format income statement for the
most recent month is shown below:
Total
Per Unit
Sales (44,000
units)
$
396,000
$
9.00
Variable expenses
264,000
6.00
Contribution margin
132,000
$
3.00
Fixed expenses
47,000
Net operating income
$
85,000
Required:
(Consider each case independently):
1. What is the revised net operating income if unit sales
increase by 13%?
2. What is the revised net operating income if the selling price
decreases by $1.20 per unit and the number...
Miller Company’s contribution format income statement for the most recent month is shown below: Total Per...
Miller Company’s contribution format income statement for the
most recent month is shown below:
Total
Per Unit
Sales (38,000 units)
$
342,000
$
9.00
Variable expenses
228,000
6.00
Contribution margin
114,000
$
3.00
Fixed expenses
47,000
Net operating income
$
67,000
Required:
(Consider each case independently):
1. What is the revised net operating income if unit sales
increase by 19%?
2. What is the revised net operating income if the selling price
decreases by $1.20 per unit and the number...
4. acct Miller Company’s contribution format income statement for the most recent month is shown below:...
4. acct
Miller Company’s contribution format income statement for the
most recent month is shown below:
Total
Per Unit
Sales (38,000 units)
$
304,000
$
8.00
Variable expenses
190,000
5.00
Contribution margin
114,000
$
3.00
Fixed expenses
49,000
Net operating income
$
65,000
Required:
(Consider each case independently):
1. What is the revised net operating income if unit sales
increase by 17%?
2. What is the revised net operating income if the selling price
decreases by $1.20 per unit and...
Miller Company’s contribution format income statement for the most recent month is shown below: Total Per...
Miller Company’s contribution format income statement for the
most recent month is shown below:
Total
Per Unit
Sales (32,000 units)
$
160,000
$
5.00
Variable expenses
64,000
2.00
Contribution margin
96,000
$
3.00
Fixed expenses
46,000
Net operating income
$
50,000
Required:
(Consider each case independently):
1. What is the revised net operating income if unit sales
increase by 17%?
2. What is the revised net operating income if the selling price
decreases by $1.20 per unit and the number...
Miller Company’s contribution format income statement for the most recent month is shown below: Total Per...
Miller Company’s contribution format income statement for the
most recent month is shown below: Total Per Unit Sales (31,000
units) $ 186,000 $ 6.00 Variable expenses 93,000 3.00 Contribution
margin 93,000 $ 3.00 Fixed expenses 49,000 Net operating income $
44,000 Required: (Consider each case independently):
1. What is the revised net operating income if unit sales
increase by 19%?
2. What is the revised net operating income if the selling price
decreases by $1.50 per unit and the number...
Miller Company’s contribution format income statement for the most recent month is shown below: Total Per...
Miller Company’s contribution format income statement for the
most recent month is shown below:
Total
Per Unit
Sales (33,000 units)
$
231,000
$
7.00
Variable expenses
132,000
4.00
Contribution margin
99,000
$
3.00
Fixed expenses
48,000
Net operating income
$
51,000
Required:
(Consider each case independently):
1. What is the revised net operating income if unit sales
increase by 11%?
2. What is the revised net operating income if the selling price
decreases by $1.40 per unit and the...
Miller Company’s contribution format income statement for the most recent month is shown below: Total Per...
Miller Company’s contribution format income statement for the
most recent month is shown below:
Total
Per Unit
Sales (36,000 units)
$
216,000
$
6.00
Variable expenses
108,000
3.00
Contribution margin
108,000
$
3.00
Fixed expenses
41,000
Net operating income
$
67,000
Required:
(Consider each case independently):
1. What is the revised net operating income if unit sales
increase by 17%?
2. What is the revised net operating income if the selling price
decreases by $1.20 per unit and the number...
Miller Company’s contribution format income statement for the most recent month is shown below: Total Per...
Miller Company’s contribution format income statement for the
most recent month is shown below:
Total
Per Unit
Sales (34,000 units)
$
238,000
$
7.00
Variable expenses
136,000
4.00
Contribution margin
102,000
$
3.00
Fixed expenses
47,000
Net operating income
$
55,000
Required:
(Consider each case independently):
1. What is the revised net operating income if unit sales
increase by 11%?
2. What is the revised net operating income if the selling price
decreases by $1.40 per unit and the number...
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