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
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
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) |
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? |
