Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM Inc. has been experiencing difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (19,500 × $30 per unit) Variable expenses Contribution margin $585,000 409,500 175,500 180,000 $ (4,500) Fixed expenses Operating loss Required: 1. Compute the company's CM ratio and its break-even point in both unit sales and dollar sales. 2. The president believes that a $16,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $80,000 increase in monthly sales. If the president is right, what will be the effect on the company's monthly net operating income or loss? (Use the incremental approach in preparing your answer.) 3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $60,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted?

Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM Inc. has been experiencing difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (19,500 × $30 per unit) Variable expenses Contribution margin $585,000 409,500 175,500 180,000 $ (4,500) Fixed expenses Operating loss Required: 1. Compute the company's CM ratio and its break-even point in both unit sales and dollar sales. 2. The president believes that a $16,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $80,000 increase in monthly sales. If the president is right, what will be the effect on the company's monthly net operating income or loss? (Use the incremental approach in preparing your answer.) 3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $60,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted?

Accounting

27th Edition

ISBN:9781337272094

Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Chapter21: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 21.4CP: Break-even analysis Somerset Inc. has finished a new video game, Snowboard Challenge. Management is...

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Ch. 7 Incremental Analysis pg 467 Segment Income Statement Please provide the answer and explain the answer to the following question with the information given below. "Big Tent Company is trying to decide whether to keep or drop one of its outdoor wedding tents. The company's segmented income statement shows that this product is generating a net loss as follows:" Sales Revenue: $100,000 Less: Variable Costs $70,000 Contribution Margin $30,000 Less: Direct Fixed Costs $10,000 Segment Margin $20,000 Less: Allocated common fixed costs $30,000 Net Operating Income $(10,000) The company estimates that eliminating this product line will increase the contribution margin on a related product line by $25,000. Based on this information, what impact would dropping the line have on the company's overall profitability?
Problem 6-22 (Algo) CVP Applications; Contribution Margin Ratio; Break-Even Analysis; Cost Structure [LO6-1, LO6-3, LO6-4, LO6-5, LO6-6] Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Incorporated, has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below: Sales (13,000 units × $30 per unit) $ 390,000 Variable expenses 195,000 Contribution margin 195,000 Fixed expenses 217,500 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 $6,100 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $85,000 per month. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income? 3. Refer to the…
Exercise 6-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO6-4] Skip to question [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 125 100 % Variable expenses 80 64 Contribution margin $ 45 36 % Fixed expenses are $85,000 per month and the company is selling 2,700 units per month. rev: 06_04_2020_QC_CS-205709, 06_18_2020_QC_CS-216765, 07_14_2020_QC_CS-216765 Exercise 6-5 Part 1 Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,000 and monthly sales increase by $20,000? 1-b. Should the advertising budget be increased?
H6. 18. Question Content Area Aquamarine Company sells one of its products, Product X, for $50 each. Sales volume averages 5,000 units per year. Recently, its main competitor reduced the price of its product to $30. Aquamarine expects sales to drop dramatically unless it matches the price offered by its competitor. In addition, the current profit per unit must be maintained. Information about Product X (for production of 5,000 units) follows: Standard QuantityActual QuantityActual CostMaterials (pounds)8,50010,00025,000Labor (hours)2,0002,50012,000Setups (hours)02,0004,000Material handling (moves)01,0002,500Warranties (number repaired)05008,000 The non-value-added cost per unit is (Round answer to two decimal places.): a. $3.17. b. $4.50. c. $4.13. d. $3.80. 24. Question Content Area Phillips Screw Company produces screw fittings. It is determined that T = 1 inch in diameter. Specification limits allow a variation of plus or minus 0.5 inches. Products produced at…
EXERCISE 6–12 Target Profi t and Break-Even Analysis; Margin of Safety; CM Ratio [ LO1 , LO3 , LO5 , LO6 , LO7 ] Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per UnitSales. . . . . . . . . . . . . . . . . . . . . . . . $450,000 $30Variable expenses . . . . . . . . . . . . . 180,000 12Contribution margin . . . . . . . . . . . . 270,000 $18Fixed expenses. . . . . . . . . . . . . . . . 216,000Net operating income . . . . . . . . . . . $ 54,000 Required: 1. What is the monthly break-even point in units sold and in sales dollars? 2. Without resorting to computations, what is the total contribution margin at the break-even point? 3. How many units would have to be sold each month to earn a target profi t of $90,000? Use the formula method. Verify your answer by preparing a contribution format income statement at the target sales level4. Refer to the original data. Compute the company’s margin of safety in both dollar and…
Don't use chatgpt, I will 5 upvotes question 5 For the current year, Electric Corporation expected to sell 42,300 industrial power cords. Fixed costs were expected to total $1,651,500; unit sales price was expected to be $3,900; and unit variable costs were budgeted at $2,400. Electric Corporation's margin of safety (MOS) in sales dollars is: (Do not round intermediate calculations.) A. $160,676,100. B. $194,851,099. C. $166,596,097. D. $178,401,100. E. $150,226,100. A B C D E
Problem 5-25 (Algo) Changes in Fixed and Variable Costs; Break-Even and Target Profit Analysis [LO5-4, LO5-5, LO5-6] Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company’s Marketing Department estimates that demand for the new toy will range between 15,000 units and 30,000 units per month. The new toy will sell for $9.00 per unit. Enough capacity exists in the company’s plant to produce 20,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $5.00 , and incremental fixed expenses associated with the toy would total $34,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $4.00 per unit plus a fixed fee of $47,000 per month for any production volume up to 20,000 units. For a production volume between 20,001 and 45,000 units the fixed fee would increase to a total of $94,000 per month. Required: 1. Calculate the break-even point in…
Exercise 5-5 (Algo) Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO5-4] [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 105 100% Variable expenses 63 60 Contribution margin $ 42 40% Fixed expenses are $81,000 per month and the company is selling 3,800 units per month. Exercise 5-5 (Algo) Part 2 2-a. Refer to the original data. How much will net operating income increase (decrease) per month if the company uses higher-quality components that increase the variable expense by $4 per unit and increase unit sales by 20%. 2-b. Should the higher-quality components be used?
Item8 2.5 points Return to questionitem 8 Exercise 11-19A (Algo) Margin of safety LO 11-6 Information concerning a product produced by Ender Company appears here: Sales price per unit $172 Variable cost per unit $91 Total annual fixed manufacturing and operating costs $502,200 Required Determine the following: Contribution margin per unit. Number of units that Ender must sell to break even. Sales level in units that Ender must reach to earn a profit of $291,600. Determine the margin of safety in units, sales dollars, and as a percentage. a. Contribution margin per unit. b. Number of units that Ender must sell to break even. c. Sales level in units that Ender must reach to earn a profit of $291,600. a. Contribution margin b. Break-even in units c. Break-even in units to earn profit of $291,600 Determine the margin of safety in units, sales dollars, and as a percentage. Note: Round "Percentage" answer to 1 decimal place ( I.e., 0.234 should be entered as 23.4). Units? Sales ? Percentage…
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xlsx 3.5 Sargent, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90. The company’s monthly fixed expenses are $180,000. A. What is the company’s break-even point in units? B. What is the company’s break-even point in dollars? C. Prepare a contribution margin income statement for the month of October when they will sell 10,000 units. D. How many units will Sargent need to sell in order to realize a target profit of $300,000? E. What dollar sales will Sargent need to generate in order to realize a target profit of $300,000? F. Construct a contribution margin income statement for the month of August that reflects $2,400,000 in sales revenue for Sargent, Inc.