Question

In: Accounting

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 variable cost per unit decreases by $5, spending on advertising increases by $4,000, and unit sales increase by 450 units, what would be the estimated net operating income?

G) What is the break-even point in dollar sales?

H) Estimate how many units must be sold to achieve a target profit of $60,000.

Expert Solution

	Total	Per units
Sales (4,000 units)	$200,000	$50.00	=200000/4000
Variable expenses	$110,000	$27.50	=110000/4000
Contribution Margin	$90,000	$22.50	=90000/4000
Fixed Expense	$48,000
Net Operating Profit	$42,000

Answer A.

Contribution Margin Per unit = Contribution margin / Total no of units

=$90,000 / 4,000 units

=$22.5 per unit

Answer B.

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

=($90,000 / $200,000) * 100

=45%

Answer C.

Variable Expense Ratio = (Variable expense / Sales ) * 100

=($110,000 / $200,000) * 100

=$55%

*Answer D.*
*Computation of Estimated Profit if Sales increase to 6,050 units*
Sales (6,050 units)	$302,500	**=6050 $50***
Less: Variable Cost	$166,375	**=6050 $27.5***
Contribution Margin	$136,125
Fixed Expense	$48,000
Net Operating Profit	$88,125

*Answer E.*
*Computation of Estimated Net Operating income*
Sales (4,200 units)	$193,200	**=4200 $46***
Less: Variable Cost	$115,500	**=4200 $27.5***
Contribution Margin	$77,700
Fixed Expense	$48,000
Net Operating Profit	$29,700

*Answer F.*
*Computation of Estimated Net Operating income*
Sales (4,450 units)	$222,500	**=4450 50***
Less: Variable Cost	$100,125	**=4450 ($27.5 - $5)***
Contribution Margin	$122,375
Fixed Expense	$52,000
Net Operating Profit	$70,375

Answer G.

Break Even point in dollar sales = Fixed Cost / Contribution margin ratio

=$48,000 / 45%

=$106,666

Answer H.

Computation of units sold to achieve $60,000 profit

Units to be sold to achieve desired profit = (Fixed Expenses + Desired Profit ) / Contribution Margin per unit

=($48,000 + $60,000) / $22.5

=4,800 units

ekkarill92 answered 1 year ago

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