Flash Manufacturing manufactures 16 GB flash drives (jump drives). Price and cost data for a relevant range
Question:
Per-unit (current monthly sales volume is 140,000 units).........................$ 25.00
Variable costs per unit: Direct materials.................................................... $ 7.30
Direct labor..................................................................................................$ 6.00
Variable manufacturing overhead...............................................................$ 2.60
Variable selling and administrative expenses.............................................$ 2.10
Monthly fixed expenses:
Fixed manufacturing overhead.............................................................$ 292,000
Fixed selling and administrative expenses........................................... $ 447,200
Requirements
1. What is the company’s contribution margin per unit? contribution margin percentage? Total contribution margin?
2. What would the company’s monthly operating income be if the company sold 170,000 units?
3. What would the company’s monthly operating income be if the company had sales of $ 4,500,000?
4. What is the breakeven point in units? In sales dollars?
5. How many units would the company have to sell to earn a target monthly profit of $ 269,500?
6. Management is currently in contract negotiations with the labor union. If the negotiations fail, direct labor costs will increase by 10% and fixed costs will increase by $ 24,000 per month. If these costs increase, how many units will the company have to sell each month to breakeven?
7. Return to the original data for this question and the rest of the questions. What is the company’s current operating leverage factor (round to two decimals)?
8. If sales volume increases by 8%, by what percentage will operating income increase?
9. What is the company’s current margin of safety in sales dollars? What is its margin of safety as a percentage of sales?
10. Say the company adds a second line of flash drives (32 GB in addition to 16 GB). A unit of the 32 GB flash drives will sell for $ 50 and have variable cost per unit of $ 22 per unit. The expected sales mix is six of the small flash drives (16 GB) for every one large flash drive (32 GB). Given this sales mix, how many of each type of flash drive will the company need to sell to reach its target monthly profit of $ 269,500? Is this volume higher or lower than previously needed (in Question 5) to achieve the same target profit? Why?
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
1 Sales price per unit 2500 Less Variable cost per unit 7306260210 1800 Contribution margin per unit ...View the full answer
Answered By
Mary Boke
As an online tutor with over seven years of experience and a PhD in Education, I have had the opportunity to work with a wide range of students from diverse backgrounds. My experience in education has allowed me to develop a deep understanding of how students learn and the various approaches that can be used to facilitate their learning. I believe in creating a positive and inclusive learning environment that encourages students to ask questions and engage with the material. I work closely with my students to understand their individual learning styles, strengths, and challenges to tailor my approach accordingly. I also place a strong emphasis on building strong relationships with my students, which fosters trust and creates a supportive learning environment. Overall, my goal as an online tutor is to help students achieve their academic goals and develop a lifelong love of learning. I believe that education is a transformative experience that has the power to change lives, and I am committed to helping my students realize their full potential.
4+ Reviews
21+ Question Solved
Related Book For 
Question Posted:
