Memofax, Inc., produces memory enhancement kits for fax machines.Sales have been very erratic, with some months showing a profit andsome months showing a loss. The company's contribution formatincome statement for the most recent month is given below:
Sales (13,500 units at $40 per unit) $ 540,000
Variable expenses 324,000
Contribution margin 216,000
Fixed expenses 240,000
Net operating loss $ (24,000)
Required:
1.
Compute the company's CM ratio and its break-even point in bothunits and dollars. (Omit the "%" and "$" signs in yourresponse.)
CM ratio ???? %
Break-even point in units ????
Break-even point in dollars $ ????
2.
The sales manager feels that an $6,100 increase in the monthlyadvertising budget, combined with an intensified effort by thesales staff, will result in a $89,000 increase in monthly sales. Ifthe sales manager is right, what will the revised net operatingincome or loss? (Use the incremental approach in preparing youranswer.) (Omit the "$" sign in your response.)
Loss or Income? ________________?????
3.
Refer to the original data. The president is convinced that a 10%reduction in the selling price, combined with an increase of$35,000 in the monthly advertising budget, will double unit sales.What will the new contribution format income statement look like ifthese changes are adopted? (Input all amounts as positive valuesexcept losses which should be indicated by minus sign. Omit the "$"sign in your response.)
4.
Refer to the original data. The company
Memofax, Inc., produces memory enhancement kits for fax machines.Sales have been very erratic, with some months showing a profit andsome months showing a loss. The company's contribution formatincome statement for the most recent month is given below:
Sales (13,500 units at $40 per unit) $ 540,000
Variable expenses 324,000
Contribution margin 216,000
Fixed expenses 240,000
Net operating loss $ (24,000)
Required:
1.
Compute the company's CM ratio and its break-even point in bothunits and dollars. (Omit the "%" and "$" signs in yourresponse.)
CM ratio ???? %
Break-even point in units ????
Break-even point in dollars $ ????
2.
The sales manager feels that an $6,100 increase in the monthlyadvertising budget, combined with an intensified effort by thesales staff, will result in a $89,000 increase in monthly sales. Ifthe sales manager is right, what will the revised net operatingincome or loss? (Use the incremental approach in preparing youranswer.) (Omit the "$" sign in your response.)
Loss or Income? ________________?????
3.
Refer to the original data. The president is convinced that a 10%reduction in the selling price, combined with an increase of$35,000 in the monthly advertising budget, will double unit sales.What will the new contribution format income statement look like ifthese changes are adopted? (Input all amounts as positive valuesexcept losses which should be indicated by minus sign. Omit the "$"sign in your response.)
4.
Refer to the original data. The company
Related questions
A company produces memory enhancement kits for fax machines. Saleshave been very erratic, with some months showing a profit and somemonths showing a loss. The company's contribution format incomestatement for the most recent month is given below: |
| Sales (12,600 units at $40 per unit) | $ | 504,000 |
| Variable expenses | 252,000 | |
| Contribution margin | 252,000 | |
| Fixed expenses | 282,000 | |
| Net operating loss | $ | (30,000) |
| | | |
| Required: | |
| 1. | Compute the company's CM ratio and its break-even point in bothunits and dollars. |
| CM ratio | % |
| Break-even point in units | |
| Break-even point in dollars | $ |
| 2. | The sales manager feels that an $6,700 increase in the monthlyadvertising budget, combined with an intensified effort by thesales staff, will result in a $81,000 increase in monthly sales. Ifthe sales manager is right, what will the revised net operatingincome or loss? (Use the incremental approach in preparing youranswer.) |
| (Click to select)Net operating lossNet operating incomeis | $ | |
| 3. | Refer to the original data. The president is convinced that a 10%reduction in the selling price, combined with an increase of$37,000 in the monthly advertising budget, will double unit sales.What will the new contribution format income statement look like ifthese changes are adopted? |
| Contribution Income Statement | |
| (Click to select)Net operating income (loss)SalesFixedexpensesContribution marginVariable expenses | $ |
| (Click to select)Contribution marginSalesVariableexpensesNet operating income (loss)Fixed expenses | |
| (Click to select)Net operating income (loss)VariableexpensesContribution marginSalesFixed expenses | |
| (Click to select)Variable expensesContributionmarginNet operating income (loss)Fixed expensesSales | |
| (Click to select)SalesVariable expensesNet operatingincome (loss)Fixed expensesContribution margin | $ |
| | |
| 4. | Refer to the original data. The company |
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
