Ch7 Problem 7-19 solution

# Ch7 Problem 7-19 solution - Problem719(60minutes 1...

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Problem 7-19  (60 minutes) 1. The CM ratio is 30%. Total Per Unit Percentage Sales (13,500 units). ....... \$270,000 \$20 100% Variable expenses. ..........   189,000       14       70%     Contribution margin. ........ \$ 81,000 \$ 6   30%     The break-even point is: Sales = Variable expenses + Fixed expenses + Profits \$20Q = \$14Q + \$90,000 + \$0 \$ 6Q = \$90,000 Q = \$90,000 ÷ \$6 per unit Q = 15,000 units 15,000 units × \$20 per unit = \$300,000 in sales Alternative solution: Fixed expenses Break-even point  =  in unit sales Unit contribution margin \$90,000  = 15,000 units \$6 per unit Fixed expenses Break-even point  =  in sales dollars CM ratio \$90,000 = \$300,000 in sales 0.30 2. Incremental contribution margin: \$70,000 increased sales × 30% CM ratio. ........... \$21,000 Less increased fixed costs: Increased advertising cost. ..................................       8,000     Increase in monthly operating income. ................... \$13,000 Since the company presently has a loss of \$9,000 per month, if the  changes are adopted, the loss will turn into a profit of \$4,000 per  month.

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Problem 7-19  (continued) 3. Sales (27,000 units × \$18 per unit*). ................ \$486,000 Variable expenses
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## This note was uploaded on 02/18/2012 for the course BUSE 237 taught by Professor Sf during the Spring '12 term at Simon Fraser.

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Ch7 Problem 7-19 solution - Problem719(60minutes 1...

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