Chapter 5 Exercise

Lister Corporation has provided the following contribution format income statement for October, 2019. The company produces and sells a single product.

Sales (3,000 units) $90,000

Variable expenses 58,500

Contribution margin 31,500

Fixed expenses 21,000

Net operating income $10,500

1.What is the company's unit contribution margin and contribution margin ratio?

2.Calculate the company's break-even sales in units and in dollars.

3.Calculate the unit sales and dollar sales needed to achieve a target profit of $13,650.

4.The marketing manager would like to initiate a marketing campaign in November to promote sales in the holiday season. The campaign will increase advertising expenditure by $5,000. In addition, a $2 discount in unit selling price will be provided to customers. The marketing manager predicts that these changes will increase monthly sales by 1,500 units. Should the firm initiate the marketing campaign?