Move On Marketing (MOM) Pty Ltd produces television advertisements for local businesses. The contribution margin income statement
Question:
Move On Marketing (MOM) Pty Ltd produces television advertisements for local businesses. The contribution margin income statement for the company is as follows:
Marketing fees (52 television advertisements) Variable expenses | $ | 624000 249600 |
Fixed expenses | 374400 324000 | |
Profit | $ | 50400 |
The company is supposed to achieve a 15% profit margin (profit ÷ marketing fees) and as the CEO of the company you have to sign off on any actions taken to meet this target. This requires you to understand each of the possible alternative actions.
Required
A. With the current level of fees, what is the required profit to achieve the target profit margin?
B. What is the CVP equation for MOM Pty Ltd and the break-even number of television advertisements per year?
C. With the current pricing and variable cost structure, what level of sales are required to meet the company’s profit target?
Contribution MarginContribution 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...
Step by Step Answer:
A 624000 x 15 93600 required profit margin B The CVP equation for MOM Pty Ltd is 12000x 4800 x ...View the full answer
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett
