Drake, Inc. manufactures electric welders that it sells to other manufacturers, and sales last year were...

Drake, Inc. manufactures electric welders that it sells to other manufacturers, and sales last year were $45 million. Drake has a 35% contribution margin. The marketing manager has suggested increasing the number of sales representatives by five, which would cause fixed costs to increase by $250,000. Another suggestion is to reduce price by 10%. What incremental dollar volume would be necessary to break even on the suggestion to hire five additional sales reps? What absolute increase in dollar sales volume would be necessary to maintain Drake’s current contribution if price was reduced by 10%? Which suggestion do you think Drake should implement? Explain your recommendation

Expert Solution

1-
sales		45
v.cost	45*(1-.35)	29.25
contribution margin		15.75
contribution margin ratio = contribution/sales	15.75/45	0.35
incremental sales to recover the fixed cost of 5 new sales representatives	.25/35%	0.71
new level of sales to recover fixed cost	45+.71	45.71

2-
sales	45*(1-.1)	40.5
variable cost	as of before	29.25
new contribution margin		11.25
new contribution margin ratio = contribution/sales		27.78%
total contribution margin required as before		15.75
new level of sales = contributin margin/new contribution margin ratio	15.75/27.78%	56.70
absolute increase in sales	56.70-45	11.7
3-
Dark should implement employment of additional sales representatives because this fixed cost can be recovered by additional sales of .71 million while if prices are reduced by 10% then additional sales of 11.7 million would be made additional to maintain the present level of contribution margin

jeff jeffy answered 11 months ago

Company manufactures and sells a single product. The company's sales and expenses for last year follow:...

Company manufactures and sells a single product. The company's sales and expenses for last year follow: LOADING... (Click the icon to view the information.)Read the requirements LOADING... . Requirement 1. Fill in the missing numbers in the table. Use the following questions to help fill in the missing numbers in the table: a. What is the total contribution margin? The total contribution margin is . b. What is the total variable expense? The total variable expense is . c. How...

Han Corp's sales last year were $315,000, and its year-end receivables were $52,500. The firm sells...

Han Corp's sales last year were $315,000, and its year-end receivables were $52,500. The firm sells on terms that call for customers to pay 30 days after the purchase, but some delay payment beyond Day 30. On average, how many days late do customers pay? Base your answer on this equation: DSO – Allowed credit period = Average days late, and use a 365-day year when calculating the DSO. Assume all sales to be on credit. Do not round your...

Harper Corp.'s sales last year were $425,000, and its year-end receivables were $42,500. Harper sells on...

Harper Corp.'s sales last year were $425,000, and its year-end receivables were $42,500. Harper sells on terms that call for customers to pay 30 days after the purchase, but many delay payment beyond Day 30. On average, how many days late do customers pay? Base your answer on this equation: DSO -Allowed credit period = Average days late, and use a 365-day year when calculating the DSO. Answers: a. 6.50 b. 8.37 c. 9.27 d. 8.81 e. 9.74

The annual sales for Salco, Inc. were $ 4.55 million last year. The firm's end-of-year balance...

The annual sales for Salco, Inc. were $ 4.55 million last year. The firm's end-of-year balance sheet was as follows: Current assets $499,000 Liabilities $1,001,500 Net fixed assets 1504000 Owners' equity 1001500 Total Assets $2,003,000 Total $2,003,000 LOADING.... Salco's income statement for the year was as follows: Sales $4,550,000 Less: Cost of goods sold (3,506,000) Gross profit $1,044,000 Less: Operating expenses (495,000) Net operating income $549,000 Less: Interest expense (101,000) Earnings before taxes $448,000 Less: Taxes (35%) (156,800) Net...

(Financial statement analysis) The annual sales for Salco, Inc. were $ 4.39 million last year. The...

(Financial statement analysis) The annual sales for Salco, Inc. were $ 4.39 million last year. The firm's end-of-year balance sheet was as follows: Salco's income statement for the year was as follows: b. Salco plans to renovate one of its plants and the renovation will require an added investment in plant and equipment of $ 1.03 million. The firm will maintain its present debt ratio of 50 percent when financing the new investment and expects sales to remain constant. The...

(Financial statement analysis) The annual sales for Salco, Inc. were $ 4.47 million last year. The...

(Financial statement analysis) The annual sales for Salco, Inc. were $ 4.47 million last year. The firm's end-of-year balance sheet was as follows: LOADING.... Salco's income statement for the year was as follows: LOADING.... a. Calculate Salco's total asset turnover, operating profit margin, and operating return on assets. b. Salco plans to renovate one of its plants and the renovation will require an added investment in plant and equipment of $ 1.04 million. The firm will maintain its present...

The annual sales for Salco, Inc. were $4.67 million last year. The firm's end-of-year balance sheet...

The annual sales for Salco, Inc. were $4.67 million last year. The firm's end-of-year balance sheet was as follows: Current assets $501,000 Liabilities $1,004,500 Net fixed assets 1,508,000 Owners' equity 1,004,500 Total Assets $2,009,000 Total $2,009,000 . Salco's income statement for the year was as follows: Sales $4,670,000 Less: Cost of goods sold (3,498,000) Gross profit $1,172,000 Less: Operating expenses (497,000) Net operating income $675,000 Less: Interest expense (98,000) Earnings before taxes ...

The annual sales for Salco, Inc. were $4.57 million last year. The firm's end-of-year balance sheet...

The annual sales for Salco, Inc. were $4.57 million last year. The firm's end-of-year balance sheet was as follows: Current assets $509,000 Liabilities $997,000 Net fixed assets 1,485,000 Owners' equity 997,000 Total Assets $1,994,000 Total $1,994,000 Salco's income statement for the year was as follows: Sales $4,570,000 Less: Cost of goods sold (3,492,000) Gross profit $1,078,000 Less: Operating expenses \(503,000) Net operating income $575,000 Less: Interest expense (97,000) Earnings before taxes $478,000 Less: Taxes (35%) (167,300) Net income $310,700 a....

The annual sales for Salco, Inc. were $4.46 million last year. The firm's end-of-year balance sheet...

The annual sales for Salco, Inc. were $4.46 million last year. The firm's end-of-year balance sheet was as follows: . Salco's income statement for the year was as follows: . a. Calculate Salco's total asset turnover, operating profit margin, and operating return on assets. b. Salco plans to renovate one of its plants and the renovation will require an added investment in plant and equipment of $1.04 million. The firm will maintain its present debt ratio of 50 percent...

last year electric out of hair sales of 105 million in assets at the start of...

last year electric out of hair sales of 105 million in assets at the start of the year of 160 million if his return on star of your assets was 10% what was its operating profit margin?

Question