# Ch3 Solutions_ANSWERS - Revenues Fixed Costs Total Costs a...

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Revenues Fixed Costs Total Costs a) \$ 2,200.00 \$ 800.00 \$ 400.00 \$ 1,200.00 \$ 1,000.00 \$ 1,400.00 63.64% b) \$ 2,400.00 \$ 1,300.00 \$ 400.00 \$ 1,700.00 \$ 700.00 \$ 1,100.00 45.83% c) \$ 900.00 \$ 500.00 \$ 400.00 \$ 900.00 \$ - \$ 400.00 44.44% d) \$ 1,800.00 \$ 900.00 \$ 400.00 \$ 1,300.00 \$ 500.00 \$ 900.00 50.00% Variable Costs Operating Income Contribution Margin Contribution Margin %

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1a Sales (\$68 per unit x 410,000 units) \$ 27,880,000.00 Variable Costs (\$60 per unit x 410,000 units) \$ 24,600,000.00 Contribution Margin \$ 3,280,000.00 1b Contribution Margin (from above) \$ 3,280,000.00 Fixed Costs \$ 1,640,000.00 Operating Income \$ 1,640,000.00 2a Sales (from above) \$ 27,880,000.00 Variable Costs (\$54 per unit x 410,000 units) \$ 22,140,000.00 Contribution Margin \$ 5,740,000.00 2b Contribution Margin (from above) \$ 5,740,000.00 Fixed Costs \$ 5,330,000.00 Operating income \$ 410,000.00 3 Operating income is expected to decrease by \$1,230,000 (\$1,640,000 − \$410,000) if Ms. Schoene Management would consider other factors before making the final decision. It is likely that product qua using state of the art equipment. Due to increased automation, probably many workers will have to be will have to consider the impact of such an action on employee morale. In addition, the proposal incre dramatically. This will increase the company’s operating leverage and risk
en’s proposal is accepted. ality would improve as a result of e laid off. Garrett’s management eases the company’s fixed costs k.

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1a Sales Price \$ 130.00 (per ticket) Quantity = 375 Variable Cost per Unit \$ 34.00 (per ticket) Contribution Margin per Unit \$ 96.00 Fixed Costs \$ 36,000.00 (per month) 1b Target Operating Income \$ 12,000.00 Quantity = 500 2a Sales Price \$ 130.00 (per ticket) Quantity = 360 Variable Cost per Unit \$ 30.00 (per ticket) Contribution Margin per Unit \$ 100.00 Fixed Costs \$ 36,000.00 (per month) 2b Target Operating Income \$ 12,000.00 Quantity = 480 3a Sales Price \$ 46.00 (per ticket) Quantity = 2,250 Variable Cost per Unit \$ 30.00 (per ticket) Contribution Margin per Unit \$ 16.00 Fixed Costs \$ 36,000.00 (per month) 3b Target Operating Income \$ 12,000.00 Quantity = 3,000 10% Commission (Requ Breakeven point 360 Attain OI of \$12,000 480 4a Sales Price \$ 54.00 (per ticket) Quantity = 1,500 Variable Cost per Unit \$ 30.00 (per ticket) Contribution Margin per Unit \$ 24.00 Fixed Costs \$ 36,000.00 (per month) 4b Target Operating Income \$ 12,000.00 Quantity = 2,000 The reduced commission sizably increases the breakeven poi income The \$8 delivery fee results in a higher contribution margin, attain operating
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