Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below: Sales (12,600 units × $20 per unit) $ 252,000 Variable expenses 151,200 Contribution margin 100,800 Fixed expenses 112,800 Net operating loss $ (12,000 ) Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $53,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.
Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below: Sales (12,600 units × $20 per unit) $ 252,000 Variable expenses 151,200 Contribution margin 100,800 Fixed expenses 112,800 Net operating loss $ (12,000 ) Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $53,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter12: Activity-based Management
Section: Chapter Questions
Problem 28P: Bienestar, Inc., has two plants that manufacture a line of wheelchairs. One is located in Kansas...
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Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below:
Sales (12,600 units × $20 per unit) | $ | 252,000 | |
Variable expenses | 151,200 | ||
Contribution margin | 100,800 | ||
Fixed expenses | 112,800 | ||
Net operating loss | $ | (12,000 | ) |
Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $53,000 each month.
a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.
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