Question
Aldovar Company produces a variety of chemicals. One division makes reagents for laboratories. The division's projected income statement for the coming year is: Sales (203,000
Aldovar Company produces a variety of chemicals. One division makes reagents for laboratories. The division's projected income statement for the coming year is: Sales (203,000 units @ $70) $14,210,000 Total variable cost 8,120,000 Contribution margin $6,090,000 Total fixed cost 4,945,500 Operating income $1,144,500 Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. Calculate the contribution margin ratio and use it to calculate the break-even sales revenue. (Note: Round contribution margin ratio to four significant digits, and round the break-even sales revenue to the nearest dollar.) Unit contribution margin $ Break-even point in units Contribution margin ratio Break-even sales revenue $ 2. The divisional manager has decided to increase the advertising budget by $250,000. This will increase sales revenues by $1 million. By how much will operating income increase or decrease as a result of this action? Use your answers from part 1 to determine the amountSuppose sales revenues exceed the estimated amount on the income statement by $1,500,000. Without preparing a new income statement, by how much are profits underestimated? Use your answers from part 1 to determine the amount
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