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Unformatted text preview: Jonathan Maloy Accounting Assignment Question 1 Tanner Company's most recent contribution format income statement is presented below: Note: Contribution margin =.40 Variable expenses = 60% of sales There was no beginning or ending inventories. Required: a. Compute the company's break-even point in sales revenue. (36,000+0)/ (30,000) =1.2 Break even in units 1.2*75,000= 90,000 Break-even point in sales revenue b. Compute the total variable expenses at the break-even point. 1.2X45,000=54,000 c. What are the sales revenues needed to earn a target profit of $9,000? 36000+9000/30000=1.5 1.5X75,000=112,500 d. The sales manager is convinced that a $6,000 increase in the advertising budget would increase total sales by $25,000. Would you advise the increased advertising outlay? 75,000+25,000=100,000 45,000/75,000=.6 Sales=$100,000 VC= $60,000 CM-$40,000 AE =$6,000 GM =$34,000 FE=$36,000 N.O.I.=$-2,000 He is correct. Variable expenses are 60% of the sales. So 6,000 isnt much because only 24% of cost increases of sales of 25,000 so it would be worth a shot. Question 2...
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This note was uploaded on 02/14/2012 for the course ECON 2111 taught by Professor Deng during the Spring '11 term at University of West Georgia.
- Spring '11