Based in Italy, Datura, Ltd., is an international importer-exporter of pottery with distribution centers in the United States, Europe, and Australia. The company was very successful in its early years, but its profitability has since declined. As a member of a management team selected to gather information for Datura's next strategic planning meeting, you have been asked to review its most recent contribution margin income statement for the year ended December 31, 2014, which follows.

In 2014, Datura sold 15,000 sets of pottery.
1. For each set of pottery sold in 2014, calculate the (a) selling price, (b) variable purchases cost, (c) variable distribution cost, (d) variable sales commission, and (e) contribution margin.
2. Calculate the breakeven point in units and in sales euros.
3. Historically, Datura's variable costs have been about 60 percent of sales. What was the ratio of variable costs to sales in 2014? (Round to two decimal places.) List three actions Datura could take to correct the difference.
4. How would fixed costs have been affected if Datura had sold only 14,000 sets of pottery in 2014?

Transcribed Image Text:

Datura, Ltd. Contribution Margin Income Statement For the Year Ended December 31, 2014 Sales revenue 13,500,000 Less variable costs: Purchases Distribution Sales commissions otal variable costs 6,000,000 2,115,000 1,410,000 9,525,000 3,975,000 Contribution margin Less fixed costs: Distribution Selling General and administrative Total fixed costs 985,000 1,184,000 871,875 3,040,875 934,125 Operating income