Question

Kerchoo! Flag Company has a per unit variable cost of $10.00 per unit, which is 60% of the selling price. Fixed costs are $100,000. Calculate break even in sales $ and units using the contribution margin and contribution margin approach and the contribution margin income statement table. No equation approach, that is, do not copy formulas/equations from the text and then substitute in values. There is enough of that in MyLab. Use the table.

	Total Amount (Contribution Margin Income Statement)	Contribution Margin per Unit	Contribution Margin Ratio
Net Revenue
Less Variable Costs
Contribution Margin
Less Fixed Costs
Operating Income

           

2. What must Kerchoo! sell in $ and units to earn an operating income of $25,000? Calculate break even in sales $ and units using the contribution margin and contribution margin approach and the contribution margin income statement table. No equation approach!

3. Based on the original figures in question #1, what would happen to the break even if Kerchoo! began a promotion that would increase per unit variable costs by 10%? Anticipated sales volume is 17,500 flags. Is the promotion a good idea? Use the contribution margin and contribution margin approach and the contribution margin income statement table. No equation approach!

4. Based on the original figures in question #1, what happens if Kerchoo! adds machinery to automate production, which will increase fixed costs by $30,000 and decrease per unit variable costs 20%? Would you recommend this change? Use the contribution margin and contribution margin approach and the contribution margin income statement table. No equation approach!

5. Analyze and interpret your results from question 4 in comparison to your results from question 1. Limit 200 words.

Answer 1