Memofax, Inc. produces memory enhancement software forcomputers. Sales have been very erratic, with some months showing aprofit and some months showing a loss. The companyâs contributionformat income statement for the most recent month is givenbelow
Sales (19,500 unitsat $40 per unit) $ 780,000 less: Variable expenses 585,000 Contributionmargin 195,000 LEss: Fixed expenses 206,000 Net operatingloss $ (11,000)
The companyâs advertising agency thinks that a new package wouldhelp sales. The new package being proposed would increase packagingcosts by $0.5 per unit. Assuming no other changes, how many unitswould have to be sold each month to earn a profit of $3,000?
Memofax, Inc. produces memory enhancement software forcomputers. Sales have been very erratic, with some months showing aprofit and some months showing a loss. The companyâs contributionformat income statement for the most recent month is givenbelow |
| Sales (19,500 unitsat $40 per unit) | $ | 780,000 |
| less: Variable expenses | 585,000 | |
| Contributionmargin | 195,000 | |
| LEss: Fixed expenses | 206,000 | |
| Net operatingloss | $ | (11,000) |
The companyâs advertising agency thinks that a new package wouldhelp sales. The new package being proposed would increase packagingcosts by $0.5 per unit. Assuming no other changes, how many unitswould have to be sold each month to earn a profit of $3,000? |
Related questions
Memofax, Inc. produces memory enhancement software forcomputers. Sales have been very erratic, with some months showing aprofit and some months showing a loss. The companyâs contributionformat income statement for the most recent month is givenbelow |
| Sales (19,500 unitsat $40 per unit) | $ | 780,000 |
| less: Variable expenses | 585,000 | |
| Contributionmargin | 195,000 | |
| LEss: Fixed expenses | 206,000 | |
| Net operatingloss | $ | (11,000) |
By automating, the company could slash its variable expenses inhalf. However, fixed costs would increase by $86,500 per month. |
| a. | Compute the new CM ratio and the new break-even point in bothunits and dollars. contribution margin ratio: % break-even point in units : break-even point in dollars : |
b.
Assume that the company expects to sell 27,000 units next month.Prepare two contribution format income statements: one assumingthat operations are not automated, and one assuming that they are.(Do not round intermediate calculations. Round "Per Unit"and "Percentage" to 2 decimal places.)
Not Automated and AutomatedTotal Per Unit,Percentage, andsales
