Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Chapter 6, Problem 22P
To determine
Contribution margin:The difference between the sales revenue and the variable expenses is called a contribution margin.
Break-Even Point:A break-even point is the point where a company is neither making profit nor incurring any loss.
Target Profit Analysis:It is an analysis of how much unit sales or dollar sales value a company must be attain to realize the target profit estimated by the company.
1. The CM ratio and Break-even point in unit and dollar.
2. The increase in net operating income.
3. The revised net operating income (loss).
4. Required units to be sold to attain a target profit of $9,750.
5.
a) The new CM ratio and new break-even point in unit sales and dollar sales.
b) Preparation of two contribution format income statements.
c) Recommendation.
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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 format Income statement for the most recent month is given below:
Sales (12,600 units x $30 per unit)
Variable expenses
$ 378,000
226,800
151,280
169, 280
Contribution margin
Fixed expenses
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 data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of
$39,000 in the monthly advertising…
es
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 format income statement for the most recent month is given below:
Sales (13,300 units x $20 per unit)
Variable expenses
Contribution margin
Fixed expenses
Net operating loss
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 $6,300 increase in the monthly advertising budget, combined with an intensified effort by the sales
staff, will increase unit sales and the total sales by $84,000 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 data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of
$31,000 in the monthly advertising budget, will double unit sales. If the sales…
Due to erratic sales of Its sole product-a high-capacity battery for laptop computers-PEM, Incorporated, has been
experlencing financial difficulty for some time. The company's contribution format Income statement for the most recent
month Is given below:
Sales (13,280 units x $28 per unit)
Variable expenses
Contribution margin
Fixed expenses
$ 264,809
132,000
132,000
147,880
Net operating loss
$ (15,000)
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 $6.100 Increase in the monthly advertising budget, combined with an Intensified effort by
the sales staff, will Increase unit sales and the total sales by $61,000 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 data. The sales manager is convinced that a 10% reduction In the selling price, combined with an
Increase of $33,000 in the monthly advertising…
Chapter 6 Solutions
Introduction To Managerial Accounting
Ch. 6.A - The Cheyenne Hotel in Big Sky, Montana, has...Ch. 6.A - Least-Squares Regression LOS11 Bargain Rental Car...Ch. 6.A - Prob. 3ECh. 6.A - Archer Company is a wholesaler of custom-built...Ch. 6.A - George Caloz&Freres, located in Grenchen,...Ch. 6.A - Least-Square. Regression; Scattergraph; Comparison...Ch. 6.A - Cost Behaviour; High4æw Method; Contribution...Ch. 6.A - Nova Company’s total overhead cost at various...Ch. 6.A - High-Low Method; Contribution Format Income...Ch. 6.A - Least-Squares Regression Method; Scattergraph;...
Ch. 6.A - Mixed Cost Analysis and the Relevant Range LOS-10...Ch. 6.A - Prob. 12PCh. 6 - What is the meaning of contribution margin ratio?...Ch. 6 - Prob. 2QCh. 6 - In all respects, Company A and Company B are...Ch. 6 - What is the meaning of operating leverage?Ch. 6 - What is the meaning of break-even point?Ch. 6 - In response to a request from your immediate...Ch. 6 - What is the meaning of margin of safety?Ch. 6 - Prob. 8QCh. 6 - Explain how a shift in the sales mix could result...Ch. 6 - The Excel worksheet form that appears be1o is to...Ch. 6 - The Excel work sheet from that appears below is to...Ch. 6 - Prob. 3AECh. 6 - The Excel worksheet form that appears be1o is to...Ch. 6 - Prob. 5AECh. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Prob. 11F15Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - The Effect of Cha noes ¡n Activity on Net...Ch. 6 - Prob. 2ECh. 6 - Prepare a Profit Graph L062 Jaffre Enterprises...Ch. 6 - Computing and Using the CM Ratio L063 Last month...Ch. 6 - Changes in Venable Costs, Fixed Costs, Selling...Ch. 6 - Prob. 6ECh. 6 - Lin Corporation has a single product 1ose selling...Ch. 6 - Compute the Margin of Safety LO6-7 Molander...Ch. 6 - Compute and Use the Degree 01 Operating Leverage...Ch. 6 - Prob. 10ECh. 6 - Missing Data; Basic CVP Concepts L061, L069 Fill...Ch. 6 - Prob. 12ECh. 6 - Change in selling price, Sales Volume, Variable...Ch. 6 - Prob. 14ECh. 6 - Operating Leverage 1061. 1068 Magic Realm, Inc.,...Ch. 6 - Prob. 16ECh. 6 - Break-Even and Target Profit Analysis 1064, 1066,...Ch. 6 - Break-Even and Target Profit Analysis; Margin of...Ch. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - CVP Applications; Contribution Margin Ratio:...Ch. 6 - Break-Even and Target Profit Analysis LO6-6, L066...Ch. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Sales Mix; Commission Structure; Multiproduct...Ch. 6 - Changes in Cost Structure; Break-Even Analysis;...Ch. 6 - Graphing; Incremental Analysis; Operating Leverage...Ch. 6 - Interpretive Questions on the CVP Graph L062, L065...
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