Question

In: Accounting

Carmen, Inc. produces Electronic Games for personal uses. The company’s contribution format income statement is given...

Carmen, Inc. produces Electronic Games for personal uses. The company’s contribution format income statement is given below:

Sales (20,000 units)

360,000

Variable expenses

280,000

Contribution margin

80,000

Fixed expenses

92,000

Net Loss

(8,000)

Required:

  1. Compute the company’s CM ratio and its break-even point in both units and dollars
  2. The production manager proposed to include a new component in the product that would increase direct material cost by $1.5 per unit. But this requires a promotional campaign which costs $22,000 to maintain same number of unit sales. Do you accept the proposal? Explain Why?

Solutions

Expert Solution

The decision might change if there is an increase in selling price due to the usage of new component. But information regarding the change in selling price is not given.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Morton Company’s contribution format income statement for last month is given below:             ...
Morton Company’s contribution format income statement for last month is given below:              Sales (46,000 units × $27 per unit)   $   1,242,000      Variable expenses      869,400      Contribution margin      372,600      Fixed expenses      298,080      Net operating income   $   74,520      The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a...
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...
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...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales $ 900,000 Variable expenses 300,000 Contribution margin 600,000 Fixed expenses 495,000 Net operating income $ 105,000 Management is disappointed with the company’s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following: The company is divided into two sales territories—Northern and Southern. The Northern Territory recorded...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales $ 900,000 Variable expenses 400,000 Contribution margin 500,000 Fixed expenses 470,000 Net operating income $ 30,000 Management is disappointed with the company’s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following: The company is divided into two sales territories—Northern and Southern. The Northern Territory recorded...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales   $   900,000 Variable expenses      408,000 Contribution margin      492,000 Fixed expenses      465,000 Net operating income   $   27,000 Management is disappointed with the company’s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following: The company is divided into two sales territories—Northern and Southern. The...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales $ 800,000 Variable expenses 308,000 Contribution margin 492,000 Fixed expenses 465,000 Net operating income $ 27,000 Management is disappointed with the company’s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following: The company is divided into two sales territories—Northern and Southern. The Northern Territory recorded...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales $ 850,000 Variable expenses 308,000 Contribution margin 542,000 Fixed expenses 490,000 Net operating income $ 52,000 Management is disappointed with the company’s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following: The company is divided into two sales territories—Northern and Southern. The Northern Territory recorded...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales $ 900,000 Variable expenses 408,000 Contribution margin 492,000 Fixed expenses 465,000 Net operating income $ 27,000 Management is disappointed with the company’s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following: The company is divided into two sales territories—Northern and Southern. The Northern Territory recorded...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For...
Vulcan Company’s contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales $ 750,000 Variable expenses 336,000 Contribution margin 414,000 Fixed expenses 378,000 Net operating income $ 36,000 Management is disappointed with the company’s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following: The company is divided into two sales territories—Northern and Southern. The Northern territory recorded...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT