Last month when Holiday Creations, Incorporated, sold 43,000 units, total sales were $172,000, total variable expenses were $137,600, and fixed expenses were $38,600. Required: 1. What is the company’s contribution margin (CM) ratio? 2. What is the estimated change in the company’s net operating income if it can increase sales volume by 600 units and total sales by $2,400?

Last month when Holiday Creations, Incorporated, sold 43,000 units, total sales were $172,000, total variable expenses were $137,600, and fixed expenses were $38,600. Required: 1. What is the company’s contribution margin (CM) ratio? 2. What is the estimated change in the company’s net operating income if it can increase sales volume by 600 units and total sales by $2,400?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Incorporated, has been experiencing financial difficulty for some time. The company's contribution formaet Income statement for the most recent month is given below Sales (12,600 units $30 per unit) Variable expenses Contribution margin Fixed expenses $ 378,000 226,800 151,280 160,200 Net operating loss $ (18,000) Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,600 Increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $82,000 per month. If the president is right, what will be the Increase (decrease) in the company's monthly net operating Income? 3. Refer to the original dets. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $39,000 in the monthly advertising…