Memofax, Inc. produces memory enhancement software for computers. Sales have been very erratic, with some months...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Memofax, Inc. produces memory enhancement software for computers. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company's contribution format income statement for the most recent month is given below: Sales (14,500 units at $24 per unit) Less: Variable expenses Contribution margin Less: Fixed expenses Net operating loss $348,000 261,000 Contribution margin ratio Break-even point in units Break-even point in dollars 87,000 96,000 $ (9,000) Required: 1. Compute the company's CM ratio and its break-even point in both units and dollars. % 2. The sales manager feels that an $13,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $95,000 increase in monthly sales. If the sales manager is right, what will be the effect on the company's monthly net operating income or loss? (Use the incremental approach in preparing your answer.) Decrease in monthly net operating income = 3. Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $25,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted? Sales Less: Variable expenses Contribution margin Less: Fixed expenses Net operating loss $ 313,200 4. Refer to the original data. The company's advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $0.5 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $3,000? (Do not round intermediate calculations.) Unit sales to attain target profit units 5. Refer to the original data. By automating, the company could slash its variable expenses in half. However, fixed costs would increase by $84,000 per month. a. Compute the new CM ratio and the new break-even point in both units and dollars. (Do not round intermediate calculations. Round "Contribution Margin Ratio" to 2 decimal places.) Contribution margin ratio Break-even point in units Break-even point in dollars b. Assume that the company expects to sell 20,000 units next month. Prepare two contribution format income statements: one assuming that operations are not automated, and one assuming that they are. (Do not round intermediate calculations. Round "Per Unit" and "Percentage" to 2 decimal places.) Sales Less: Variable expenses Contribution margin Less: Fixed expenses Net operating income % Comparative Income Statements Not Automated Total Per Unit Percentage Total Automated Per Unit Percentage Memofax, Inc. produces memory enhancement software for computers. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company's contribution format income statement for the most recent month is given below: Sales (14,500 units at $24 per unit) Less: Variable expenses Contribution margin Less: Fixed expenses Net operating loss $348,000 261,000 Contribution margin ratio Break-even point in units Break-even point in dollars 87,000 96,000 $ (9,000) Required: 1. Compute the company's CM ratio and its break-even point in both units and dollars. % 2. The sales manager feels that an $13,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $95,000 increase in monthly sales. If the sales manager is right, what will be the effect on the company's monthly net operating income or loss? (Use the incremental approach in preparing your answer.) Decrease in monthly net operating income = 3. Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $25,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted? Sales Less: Variable expenses Contribution margin Less: Fixed expenses Net operating loss $ 313,200 4. Refer to the original data. The company's advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $0.5 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $3,000? (Do not round intermediate calculations.) Unit sales to attain target profit units 5. Refer to the original data. By automating, the company could slash its variable expenses in half. However, fixed costs would increase by $84,000 per month. a. Compute the new CM ratio and the new break-even point in both units and dollars. (Do not round intermediate calculations. Round "Contribution Margin Ratio" to 2 decimal places.) Contribution margin ratio Break-even point in units Break-even point in dollars b. Assume that the company expects to sell 20,000 units next month. Prepare two contribution format income statements: one assuming that operations are not automated, and one assuming that they are. (Do not round intermediate calculations. Round "Per Unit" and "Percentage" to 2 decimal places.) Sales Less: Variable expenses Contribution margin Less: Fixed expenses Net operating income % Comparative Income Statements Not Automated Total Per Unit Percentage Total Automated Per Unit Percentage
Expert Answer:
Answer rating: 100% (QA)
5 old contribution margin per unit 8700014500 6 old variable cost per unit 26100014500 18 since vari... View the full answer
Related Book For
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
Students also viewed these accounting questions
-
Duchamp Company's contribution format income statement for the most recent month is given below: Sales (30,000 units). . . . . . . . . . . . . . . . . . . . . . . . . $900,000 Variable expenses. . ....
-
Whirly Corporation's contribution format income statement for the most recent month is shown below: Required: (Consider each case independently): 1. What would be the revised net operating income per...
-
Miller Company's contribution format income statement for the most recent month is shown below: Required: (Consider each case independently): 1. What is the revised net operating income if unit sales...
-
Complete this production cost report. Fill in the shaded boxes. Beginning inventory Started during the month Total units to account for Completed and tranferred out Ending work in process Total units...
-
Mrs. Vangundy is uncertain about how the cost principle applies to plant assets. Explain the principle to Mrs. Vangundy.
-
Are there any risks to Starbucks' selling its brands in food stores? Explain your answer.
-
Payroll computation with incentive bonus Fifteen workers are assigned to a group project. The production stan- dard calls for 500 units to be completed each hour to meet a customer's set deadline for...
-
Purchase Commitments Prophet Company signed a long-term purchase contract to buy timber from the U.S. Forest Service at $300 per thousand board feet. Under these terms, Prophet must cut and pay...
-
I need help solving the following problem. I need step by step instructions. The Kretovich company had a quick ratio of 1.4, a current ratio of 3.0, a days sales outstanding of 36.5 days assuming 365...
-
A factory has five assembly lines. Each assembly line is down (not working) p percent of the time. What must p equal so that there is a 95 percent chance that at least one assembly line is working?
-
PROBLEM1: A partial list of the accounts and ending account balances taken from the post-closing trial balance of Robert Corporation on December 31, 2020 is shown as follows: Account Amount Accumul...
-
TO THE - tube manometer is open to the atmosphere at the right end of the U - tube and is used to measure the pressure of a fluid whose density if 9 0 0 kg / m ^ 3 . If the density of the liquid in...
-
a company's ordering cost is $25 and the holding cost is 10% of average inventory. given that the total cost is $750, find the demand
-
One of the unique features about the active gain medium is that it cannot be made from just any material as it must have certain properties in order for the lasing action to occur. Most laser power...
-
The following are several figures reported for Allister and Barone as of December 31, 2021: Inventory Sales Investment income Cost of goods sold Operating expenses Allister Barone $ 490,000 $290,000...
-
On each day, calculate the cumulative returns over the past 10 trading days(including the current day) and the cumulative returns over the next 10 trading days. (You will need to add new columns to...
-
Hank invested $700 in a CD that had a 7.5% APR and was compounded quarterly. If Hank had the CD for 12 years, what would the total worth of the CD be at the end of 12 years?(A) $1707.43(B)...
-
From 1970 to 1990, Sri Lanka's population grew by approximately 2.2 million persons every five years. The population in 1970 was 12.2 million people.What is the best formula for P, Sri Lanka's...
-
Refer to the data in Exercise 11-7. AutoPutz, Gmbhs actual level of activity during August was 8,300 cars, although the owner had constructed his static budget for the month assuming the level of...
-
The contribution format income statement for Westex, Inc., for its most recent period is given below: The company had average operating assets of $500,000 during the period. Required: 1. Compute the...
-
Kunkel Company makes two products and uses a traditional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for...
-
In February 2005, Maggie Sharrer invested $12,000 in Gardentech, Inc. Gardentech's accountant, Jori Aloisio, recorded this receipt as an increase in cash and revenues. Is this treatment appropriate?...
-
Listed below are some items found in the financial statements of Jan Way Inc. Indicate in which financial statement the following items would appear. (a) Advertising expense. (d) Cash. (b) Equipment....
-
Summarized operations for the Alica Cosky Co. for the month of July are as follows. Revenues earned: for cash $45,000; on account $95,000. Expenses incurred: $43,000. for cash $26,000; on account...
Study smarter with the SolutionInn App