Question
1. Tanner Company's most recent contribution format income statement is presented below: sales 75000 Variable expenses 45000 contribution Margin 30000 Fixed Expenses 36000 Net operating
1. Tanner Company's most recent contribution format income statement is presented below:
sales 75000
Variable expenses 45000
contribution Margin 30000
Fixed Expenses 36000
Net operating Loss (6000)
The company sells its only product for $15 per unit. There were no beginning or ending inventories. Required: a. Compute the company's break-even point in units sold. b. Compute the total variable expenses at the break-even point. c. How many units would have to be sold to earn a target profit of $9,000? d. The sales manager is convinced that a $6,000 increase in the advertising budget would increase total sales by $25,000. Would you advise the increased advertising outlay?
2. Deavila Inc. produces and sells two products. Data concerning those products for the most recent month appear below:
Sales Product Q91I 15000Product j53Z 11000
Variable Expenses Product Q91I 5850 Product J53Z 5070
Fixed expenses for the entire company were $13,980. Required: a. Determine the overall break-even point for the company. Show your work! b. If the sales mix shifts toward Product Q91I with no change in total sales, what will happen to the break-even point for the company? Explain. 3. Fietsam Corporation's only product sells for $120 per unit. Its current sales are 43,400 units, its break-even sales are 37,324 units and fixed expenses are $74,648. Required: 1. Compute the margin of safety in both dollars and as a percentage of sales. 2. Compute operating leverage. If sales decreases by 10% what will operating income be?
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