Chapter 12, Problem 12.14E

To determine

(A)

Concept Introduction:

Contribution margin ratio is defined as the portion of each sales dollar which is left after all variable costs are incurred and the amount is available to cover fixed cost to generate profits. It calculates change in contribution margin margin for every change in revenue. It is calculated as:

Contribution Margin Ratio = Contribution Margin/ Revenue.

Break Even Point is the amount of revenue realized where the firm will have neither profit nor loss. In other words, break even point is where operating profit is equal to zero.

The selling price of the new product if the average contribution margin ratio is not changed.

To determine

(B)

Concept Introduction:

Contribution margin ratio is defined as the portion of each sales dollar which is left after all variable costs are incurred and the amount is available to cover fixed cost to generate profits. It calculates change in contribution margin margin for every change in revenue. It is calculated as:

Contribution Margin Ratio = Contribution Margin/ Revenue.

Break Even Point is the amount of revenue realized where the firm will have neither profit nor loss. In other words, break even point is where operating profit is equal to zero.

The number of units required to be sold at break even point if fixed cost is added by $30600.

To determine

(C)

Concept Introduction:

Contribution margin ratio is defined as the portion of each sales dollar which is left after all variable costs are incurred and the amount is available to cover fixed cost to generate profits. It calculates change in contribution margin margin for every change in revenue. It is calculated as:

Contribution Margin Ratio = Contribution Margin/ Revenue.

Break Even Point is the amount of revenue realized where the firm will have neither profit nor loss. In other words, break even point is where operating profit is equal to zero.

Requirement 1:

The total operating income if 20000 new product units are sold at $13.75 per unit.

Requirement 2:

To determine

The average contribution margin ratio if 20000 new product units are sold at $13.75 per unit.

To determine

(D)

Concept Introduction:

Contribution margin ratio is defined as the portion of each sales dollar which is left after all variable costs are incurred and the amount is available to cover fixed cost to generate profits. It calculates change in contribution margin margin for every change in revenue. It is calculated as:

Contribution Margin Ratio = Contribution Margin/ Revenue.

Break Even Point is the amount of revenue realized where the firm will have neither profit nor loss. In other words, break even point is where operating profit is equal to zero.

Requirement 1:

Operating Income of existing product

Requirement 2:

To determine

The complications, if some volume from existing product is added to new product.