Currently, you sell 1,000 units of product A per month at a price of $40 per unit. The variable costs are: direct materials $10/unit, direct labor $4/unit, and variable overhead $2/unit. Fixed costs are unknown. You are planning to increase the price to $50 per unit. You expect sales volume to decrease by 20% (from the original level of 1,000 units per month) after this price increase. How much will the profit change in the short term if you increase the price?
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- Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90. The companys monthly fixed expenses are $180,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of October when they will sell 10,000 units. How many units will Cadre need to sell in order to realize a target profit of $300,000? What dollar sales will Cadre need to generate in order to realize a target profit of $300,000? Construct a contribution margin income statement for the month of August that reflects $2,400,000 in sales revenue for Cadre, Inc.Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?
- Kerr Manufacturing sells a single product with a selling price of $600 with variable costs per unit of $360. The companys monthly fixed expenses are $72,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of January when they will sell 500 units. How many units will Kerr need to sell in order to realize a target profit of $120,000? What dollar sales will Kerr need to generate in order to realize a target profit of $120,000? Construct a contribution margin income statement for the month of June that reflects $600,000 in sales revenue for Kerr Manufacturing.Maple Enterprises sells a single product with a selling price of $75 and variable costs per unit of $30. The companys monthly fixed expenses are $22,500. What is the companys break-even point in units? What is the companys break-even point in dollars? Construct a contribution margin income statement for the month of September when they will sell 900 units. How many units will Maple need to sell in order to reach a target profit of $45,000? What dollar sales will Maple need in order to reach a target profit of $45,000? Construct a contribution margin income statement for Maple that reflects $150,000 in sales volume.You need 1,000 units of product Y per month. You currently make product Y in-house at a cost of $7/unit, which consists of $2/unit of fixed costs and $5/unit of variable costs. An outside supplier has offered to manufacture product Y for you at a wholesale price of $2 per unit. If you outsource the production of Y to the outside supplier in the short term, your profit will: increase by $3,000 decrease by $2,000 remain the same decrease by $3,000 increase by $2,000
- The manager of Coowie, Inc. is considering raising its current price of $30 per unit by 10%. If she does so, she estimates that demand will decrease by 20,000 units per month. Coowie currently sells 50,000 units per month, each of which costs $25 in variable costs. Fixed costs are $180,000. a. What is the current profit? b. What is the current break-even point in units? c. If the manager raises the price, what will profit be? d. If the manager raises the price, what will be the new break-even point in units?NUBD Company manufactures a face masks that sells for P10 per unit. This is its sole product and it has projected the break-even point at 50,000 units in the coming period. If fixed costs are projected at P100,000, what is the projected variable cost ratio?An electronics firm is currently manufacturing anitem that has a va riable cost of $.50 per unit and a selling priceof $1.00 per unit. Fixed costs are $14,000. Current volume is30,000 units. The firm can substantially improve the productquality by adding a new piece of equipment at an additional fixedcost of $6,000. Variable cost would increase to $.60, but volumeshould jump to 50,000 units due to a higher-quality product.Should the company buy the new equipment?
- The manager of Arbor, Incorporated, is considering raising its current price of $50 per unit by 10%. If she does so, she estimates that demand will decrease by 30,000 units per month. Arbor currently sells 100,000 units per month, each of which costs $35 in variable costs. Fixed costs are $1,200,000. Required: What is the current profit? What is the current break-even point in units? If the manager raises the price, what will profit be? If the manager raises the price, what will be the new break-even point in units? Assume the manager does not know how much demand will drop if the price increases. By how much would demand have to drop before the manager would not want to implement the price increase?Your organization sells tables for $200 each. The fixed cost is $25,000 per annum with current demand at 700 tables per annum. Each table has a direct material cost of $65 and direct labour cost of $83. Required: A. I) what is profit based on the current demand? i) How many tables should be sold to get a profit of $5,000? A. The organization is considering two alternative proposals. i. Reducing selling price by 15% which is expected to increase demand by 10% ii. Increase selling price by 5% which is expected to reduce demand by 10% What will be the profits or loss under each alternative proposal?A producer of chairs is considering the addition of a new plant to absorb the backlog of demand that now exists. The primary location being considered will have fixed costs of $10000 per month and a variable costs of $1.50 per unit produced. Each item is sold to the retailers at a price that averages $2.10 per unit. a. What volume per month is required to break even? b. What profit would be realized on a monthly volume of 65000 units? c. What volume is needed to obtain a profit of $15000 per month? d. What volume is needed to provide a revenue of $23000 per month