Question

In: Accounting

Daily Company’s current fixed costs are $430,000 and current variable cost per unit is $70. The...

Daily Company’s current fixed costs are $430,000 and current variable cost per unit is $70. The current selling price is $92 per unit.

a. What is the company's current contribution margin? Round your answer to the nearest cent (2 decimal places).

b. What is the company's current contribution margin ratio? Round your answer to 2 decimal places and include a percentage (%) sign.

c. What is the company's current break-even point in units? Round your answer to the nearest whole unit (no decimal places).

d. What is the company's current break-even point in sales dollars? Round your answer to the nearest cent (2 decimal places).

Daily Company is now considering a new product enhancement that will increase fixed costs by $30,000 from their current level, variable costs by $15 a unit from their current level, and increase the selling price by $35 from its current level.

e. What would be the company's new contribution margin? Round your answer to the nearest cent (2 decimal places).

f. What would be the company's new contribution margin ratio? Round your answer to 2 decimal places and include a percentage (%) sign.

g. What would be the company's new break-even point in units? Round your answer to the nearest whole unit (no decimal places).

h. What would be the company's new break-even point in sales dollars? Round your answer to the nearest cent (2 decimal places).

Solutions

Expert Solution

a) Contribution margin = selling price per unit- variable cost per unit
92-70
22 per unit
b) Contribution margin ratio=contribution/sales
22/92
23.91%
c. BEP(in units) = fixed cost/contribution margin
430,000/22
19545 units
d) BEP( in sales) = fixed cost/contribution margin ratio
                                     430,000/23.91%
1798181.82
e) selling price per unit (92+35)= 127
Variable cost per unit (70+15)= 85
contribution margin per unit 42
f) contribution margin ratio = 42/127
28.57%
g) BEP( units)            = (430000+30,000)/42
10952
h) BEP( sales)         = 460,000/28.57%
1610000.00

ekkarill92 answered 1 year ago
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