9. Xavier Medical Supply is a retailer of home medical equipment. Last year, Xavier's sales revenues totaled $6,000,000. Total expenses were $2,100,000. Of this amount, approximately $1,500,000 were variable, while the remainder were fixed. Since Xavier's offers thousands of different products, its managers prefer to calculate the breakeven point in terms of sales dollars rather than units. Read the requirements Requirement 1. What is Xavier's current operating income? Begin by identifying the formula to compute the operating income. (1) - (2) - (3) = Operating income The operating income is $ Requirement 2. What is Xavier's contribution margin ratio? Begin by identifying the formula to compute the contribution margin ratio. Contribution margin ratio (Enter the ratio as a whole percent) The contribution margin ratio is % Requirement 3. What is the company's breakeven point in sales dollars? (Hint: The contribution margin ratio calculated in Requirement 2 is already weighted by the company's actual sales mix) Begin by identifying the formula to compute the breakeven point in sales dollars (6) + (7) (8) = Breakeven sales in dollars (Round your answer up to the nearest whole dollar) The breakeven point in sales dollars is $ Requirement 4. Xavier's top management is deciding whether to embark on a $200.000 advertising campaign. The marketing firm has projected annual sales volume to increase by 16% as a result of this campaign. Assuming that the projections are correct, what effect would this advertising campaign have on the company's annual operating income? If Xavier embarks on this advertising campaign, sales revenue and variable costs will will cause the contribution margin to (10) by L %. However, fixed costs will (9) (11) by by $ %, which due to the advertising What effect would this advertising campaign have on Xavier's annual operating income? The effect would be (12) operating income of $ 1: Requirements 1. What is Xavier's current operating income? 2. What is Xavier's contribution margin ratio? 3. What is the company's breakeven point in sales dollars? (Hint: The contribution margin ratio calculated in Requirement 2 is already weighted by the company's actual sales mix.) 4. Xavier's top management is deciding whether to embark on a $200,000 advertising campaign. The marketing firm has projected annual sales volume to increase by 16% as a result of this campaign. Assuming that the projections are correct, what effect would this advertising campaign have on the company's annual operating income? (1) O Contribution margin O Fixed expenses O Operating income O Sale price O Sales revenue Units sold O Variable expenses (2) O Contribution margin O Fixed expenses Operating income Sale price Sales revenue Units sold Variable expenses (3) O O Contribution margin O Fixed expenses Operating income O Sale price O Sales revenue Units sold O Variable expenses (4) O Contribution margin O Fixed costs Operating income O Sales revenue Total variable cost Variable cost (5) O O Contribution margin O Fixed costs Operating income Sales revenue Total variable cost O Variable cost (6) O O Contribution margin per unit O Contribution margin ratio O Fixed expenses Operating income Units sold O Variable expenses O Contribution margin per unit Contribution margin ratio Fixed expenses Operating income Units sold O Variable expenses (9) O (10) (11) O (8) O O Contribution margin per unit O Contribution margin ratio O Fixed expenses Operating income Units sold O Variable expenses fall rise decrease increase fall rise (12) O O a decrease in O an increase in
