Ch7 Problem 7-19 solution

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

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
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.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Problem 7-19  (continued) 3. Sales (27,000 units × $18 per unit*). ................ $486,000 Variable expenses 
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 5

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

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online