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Carbell Company produces and sells a single product whose selling price is $150.00 per unit and whose variable expense is $57.00 per unit. The company's
Carbell Company produces and sells a single product whose selling price is $150.00 per unit and whose variable expense is $57.00 per unit. The company's monthly fixed expense is $381,300. The company is currently selling 5,000 units per month. Required: (i) Calculate the contribution margin ratio and the net operating income of the company or the month. (4 marks) (ii) Determine the monthly break-even in unit sales and in total dollar sales. (4 marks) (iii) Assume the company's monthly target profit is $9,300. Determine the unit sales to attain that target profit. (2 marks) (iv) Assume the company's monthly target profit is $18,600. Determine the dollar sales to attain that target profit. (2 marks) (v) Calculate the impact on the net operating income if the company can increase unit sales from 5,000 to 5,400 by increasing the monthly advertising budget by $30,000. (4 marks) (vi) (Consider this case independently) Management is considering using a new component that would increase the unit variable cost by $15. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 200 units. Calculate the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected. (4 marks)
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