Answers
1. New variable cost per unit = $18.90 - $8.10 = $10.80 per unit
| Income Statement | Present | Proposed | ||
| 40000 units | Per unit | 40000 units | Per unit | |
| Sales Revenue | $ 10,80,000 | $ 27.00 | $ 10,80,000 | $ 27.00 |
| Variable Expenses | $ 7,56,000 | $ 18.90 | $ 4,32,000 | $ 10.80 |
| Contribution margin | $ 3,24,000 | $ 8.10 | $ 6,48,000 | $ 16.20 |
| Fixed Expenses | $ 2,59,200 | $ 5,83,200 | ||
| Net Operating Income | $ 64,800 | $ 64,800 |
2.
| Income Statement | Present | Proposed | ||
| 40000 units | Per unit | 40000 units | Per unit | |
| Sales Revenue | $ 10,80,000 | $ 27.00 | $ 10,80,000 | $ 27.00 |
| Variable Expenses | $ 7,56,000 | $ 18.90 | $ 4,32,000 | $ 10.80 |
| Contribution margin | $ 3,24,000 | $ 8.10 | $ 6,48,000 | $ 16.20 |
| Fixed Expenses | $ 2,59,200 | $ 5,83,200 | ||
| Net Operating Income | $ 64,800 | $ 64,800 | ||
| Degree of Operating Leverage | 5 | 10 | ||
| Break Even point (Dollars) | $ 8,64,000 | $ 9,72,000 | ||
| Margin of Safety (Dollars) | $ 2,16,000 | $ 1,08,000 | ||
| Margin of Safety (%) | 20.00% | 10.00% |
Degree of Operating Leverage = Contribution Margin / Net Operating Income
Break even point (dollars) = Fixed Expenses / Contribution margin per unit x Sales price
Margin of safety dollars = Actual Sales - Break Even Sales
Margin of Safety (%) = Margin of Safety / Actual Sales x 100
3.
The most important factor is that, since fixed cost is higher in proposed plan, company has to sell more number of units to break even. If the company is able to break even, then proposed plan will be more beneficial as income will increase at higher rate with increase in sales.
4.
Revised Net Operating Income = $64800 x 1.2 = $77760
Contribution Margin = $77760 + 413640 = $491400
Sales units = 40000x 1.3 = 52000
Break Even Sales = $413640 / $9.45 x $27 = $1181844
.Similar Solved Questions
1 answer
A law firm seeks to recruit top quality experienced lawyers. The total package offered is the...
A law firm seeks to recruit top quality experienced lawyers. The total package offered is the sum of three separate components: a basic salary which is 1.2 times the candidate’s current salary together with an additional $3000 for each year worked as a qualified lawyer and an extra $1000 for e...
1 answer
We use histograms for data measured on a continuous scale and bar charts for data measured...
We use histograms for data measured on a continuous scale and bar charts for data measured on a categorical scale. a) True b) False...
1 answer
QUESTION 2 The wedding dress industry is monopolistically competitive. As a result, which of the following...
QUESTION 2 The wedding dress industry is monopolistically competitive. As a result, which of the following conditions applies to this industry? a. There are thousands of dress suppliers, all selling identical products. b. Dresses tend to be differentiated among the many sellers serving this market. ...
1 answer
Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat...
Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, t...
1 answer
Presented below is information related to Carter Company. Required: How much issuance of stock did Carter...
Presented below is information related to Carter Company. Required: How much issuance of stock did Carter Company have for the year? Assets, January 1 $ 48,000 Liabilities, January 1 30,000 Assets, December 31 84.000 Liabilities, December 31 54,000 Issuance of stock Revenues 16,700 Expenses 8,500 Di...
1 answer
In your own words please answer !!! You’ve worked at the same business for four years...
In your own words please answer !!! You’ve worked at the same business for four years and have been promoted to manager. You’ve heard rumors among employees that you won’t succeed as a manager. You naturally struggle with where to start. You have been a great individual contribut...
1 answer
Dazzle Inc. produces beads for jewelry manguse the following information summas production certions for the u...
Dazzle Inc. produces beads for jewelry manguse the following information summas production certions for the u ntry to record production s for overed Direct materials used Direct labor used Predetermined overhead rate based on direct labor) Goods transferred to finished goods Cost of toods sold $ 107...
1 answer
Describe ongoing or apparently "unsolvable" global health problems that you observed.
Describe ongoing or apparently "unsolvable" global health problems that you observed....
1 answer
We were unable to transcribe this imageIf a person spends $18 a week on coffee (assume...
We were unable to transcribe this imageIf a person spends $18 a week on coffee (assume $900 a year), what would be the future value of that amount over 8 years if the funds were deposited in an account earning 2 percent? Use Exhibit 1-B. (Round time value factor to 3 decimal places and final answer ...
1 answer
How do you solve #5m^2 - 11m - 3 = 0# using the quadratic formula?
How do you solve #5m^2 - 11m - 3 = 0# using the quadratic formula?...
1 answer
Solve with matlab please. All needed info is here. 1: Kinematic Constraints Collar B moves to...
Solve with matlab please. All needed info is here. 1: Kinematic Constraints Collar B moves to the left with a speed of 5 m/s, which is increasing at a constant rate of 1.5 m/s2, relative to the hoop, while the hoop rotates with the angular velocity and angular acceleration shown. Determine the magni...
1 answer
Consider the decomposition of a metal oxide to its elements, where M represents a generic metal....
Consider the decomposition of a metal oxide to its elements, where M represents a generic metal. M2O3(s)−⇀↽− 2M(s)+32O2(g) Substance ΔG°f(kJ/mol) M2O3(s) −6.90 M(s) 0 O2(g) 0 What is the standard change in Gibbs energy for the reaction, as writt...
1 answer
If one unit of Product Z2 used $3.00 of direct materials and $3.50 of direct labor,...
If one unit of Product Z2 used $3.00 of direct materials and $3.50 of direct labor, sold for $9.00, and was assigned overhead at the rate of 35% of direct labor costs, how much gross profit was realized from this sale? (Round your intermediate calculations and final answer to two decimal places.) ...
1 answer
Economics question, show steps and be clear solve in 30 minutes for thumbs up rating A...
Economics question, show steps and be clear solve in 30 minutes for thumbs up rating A new oil pump costs $8,500 and has no salvage value once installed. The manufacturer's warranty will pay the 1st year maintenance and repair costs. In the 2nd year, costs will be $900, and they will increase ...
1 answer
Home Work MED205 Name Class Date Unit 7–Drug Sources, Schedules, and Dosages Part -Matching Directions. Using...
Home Work MED205 Name Class Date Unit 7–Drug Sources, Schedules, and Dosages Part -Matching Directions. Using the answer sheet, place the letter of your choice in the appropriate space: 1. to produce sleep or stupor 2. indicated for breast cancer 3. indicated for rheumatoid arthritis 4. to pre...
1 answer
#3 loth down. What is the change in the rock's gravitational potential energy! n-cup dart gun...
#3 loth down. What is the change in the rock's gravitational potential energy! n-cup dart gun has a spring inside whose spring constant is 2000 N/m. How much spring potential energy is stored in the spring when it is compressed 6 cm as the dart is inserted into the barrel? 4. In an NCAA swim mee...