Practice 3:Bob Company, a sole proprietorship, sells only one product. The regular price is $160. Variable costs are 55% of this selling price, and fixed costs are $8,400 a month.Management decides to decrease the selling price from $160 to $145 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision.At the original selling price of $160 a unit, what is the contribution margin ratio? ________% At the original selling price of $160 a unit, what dollar volume of sales per month is required for Bob Company to break-even? (Round your answer to the nearest whole dollar.) $________ At the original selling price of $160 a unit, what dollar volume of sales per month is required for Bob Company to earn a monthly operating income of $6,500? (Round your answer to the nearest whole dollar.) $________ At the reduced selling price of $145 a unit, what is the contribution margin ratio? ________% At the reduced selling price of $145 a unit, what dollar volume of sales per month is required to break-even? (Round your intermediate percentage to one decimal place and final answer to the nearest whole dollar.) $________ While questioning management’s sanity in making this decision, you pause to consider whether it is ever a good idea to adjust prices to the point where you are making less money. Provide 2 possible explanations why Bob may have been justified in their decision to reduce the price. Practice 3:Bob Company, a sole proprietorship, sells only one product. The regular price is $160Variable costs are 55 % of this selling price, and fixed costs are $8,400 a month.Management decides to decrease the selling price from $160 to $145 per unit. Assume thatthe cost of the product and the fixed operating expenses are not changed by this pricingdecision(a) At the original selling price of $160 a unit, what is the contribution margin ratio?%(b) At the original selling price of $160 a unit, what dollar volume of sales per month isrequired for Bob Company to break-even? (Round your answer to the nearest wholedollar.) $(c) At the original selling price of $160 a unit, what dollar volume of sales per month isrequired for Bob Company to eam a monthly operating income of $6,500? (Roundyour answer to the nearest whole dollar.) $(d) At the reduced selling price of $145 a unit, what is the contribution margin ratio?(e) At the reduced selling price of $145 a unit, what dollar volume of sales per month isrequired to break-even? (Round your intermediate percentage to one decimal placeand final answer to the nearest whole dollar.) $(While questioning management's sanity in making this decision, you pause toconsider whether it is ever a good idea to adjust prices to the point where you aremaking less money. Provide 2 possible explanations why Bob may have beenjustified in their decision to reduce the price.

Contribution Margin is the ability of the company to cover its variable cost. It is the balance…

Practice 3: Bob Company, a sole proprietorship, sells only one product. The regular price is $160 Variable costs are 55 % of this selling price, and fixed costs are $8,400 a month. Management decides to decrease the selling price from $160 to $145 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision (a) At the original selling price of $160 a unit, what is the contribution margin ratio? % (b) At the original selling price of $160 a unit, what dollar volume of sales per month is required for Bob Company to break-even? (Round your answer to the nearest whole dollar.) $ (c) At the original selling price of $160 a unit, what dollar volume of sales per month is required for Bob Company to eam a monthly operating income of $6,500? (Round your answer to the nearest whole dollar.) $ (d) At the reduced selling price of $145 a unit, what is the contribution margin ratio? (e) At the reduced selling price of $145 a unit, what dollar volume of sales per month is required to break-even? (Round your intermediate percentage to one decimal place and final answer to the nearest whole dollar.) $ (While questioning management's sanity in making this decision, you pause to consider whether it is ever a good idea to adjust prices to the point where you are making less money. Provide 2 possible explanations why Bob may have been justified in their decision to reduce the price.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 5EA: Maple Enterprises sells a single product with a selling price of $75 and variable costs per unit of...

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Practice 3:

Bob Company, a sole proprietorship, sells only one product. The regular price is $160. Variable costs are 55% of this selling price, and fixed costs are $8,400 a month.

Management decides to decrease the selling price from $160 to $145 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision.

At the original selling price of $160 a unit, what is the contribution margin ratio? ________%

At the original selling price of $160 a unit, what dollar volume of sales per month is required for Bob Company to break-even? (Round your answer to the nearest whole dollar.) $________

At the original selling price of $160 a unit, what dollar volume of sales per month is required for Bob Company to earn a monthly operating income of $6,500? (Round your answer to the nearest whole dollar.) $________

At the reduced selling price of $145 a unit, what is the contribution margin ratio? ________%

At the reduced selling price of $145 a unit, what dollar volume of sales per month is required to break-even? (Round your intermediate percentage to one decimal place and final answer to the nearest whole dollar.) $________

While questioning management’s sanity in making this decision, you pause to consider whether it is ever a good idea to adjust prices to the point where you are making less money. Provide 2 possible explanations why Bob may have been justified in their decision to reduce the price.

Practice 3:
Bob Company, a sole proprietorship, sells only one product. The regular price is $160
Variable costs are 55 % of this selling price, and fixed costs are $8,400 a month.
Management decides to decrease the selling price from $160 to $145 per unit. Assume that
the cost of the product and the fixed operating expenses are not changed by this pricing
decision
(a) At the original selling price of $160 a unit, what is the contribution margin ratio?
%
(b) At the original selling price of $160 a unit, what dollar volume of sales per month is
required for Bob Company to break-even? (Round your answer to the nearest whole
dollar.) $
(c) At the original selling price of $160 a unit, what dollar volume of sales per month is
required for Bob Company to eam a monthly operating income of $6,500? (Round
your answer to the nearest whole dollar.) $
(d) At the reduced selling price of $145 a unit, what is the contribution margin ratio?
(e) At the reduced selling price of $145 a unit, what dollar volume of sales per month is
required to break-even? (Round your intermediate percentage to one decimal place
and final answer to the nearest whole dollar.) $
(While questioning management's sanity in making this decision, you pause to
consider whether it is ever a good idea to adjust prices to the point where you are
making less money. Provide 2 possible explanations why Bob may have been
justified in their decision to reduce the price.

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