Question
Cullumber sells a learning system that helps preschool and elementary students learn basic math facts and concepts. The company's income statement from last month is
Cullumber sells a learning system that helps preschool and elementary students learn basic math facts and concepts. The company's income statement from last month is as follows:
Total | Per Unit | |||
Sales revenue | $780,000 | $52 | ||
Variable expenses | 312,000 | 20.80 | ||
Contribution margin | 468,000 | $31.20 | ||
Fixed expenses | 306,000 | |||
Operating income | $162,000 |
(a)
What is Cullumber's contribution margin ratio? Its variable cost ratio?(Round ratios to 2 percentage places, e.g. 0.38 = 38%.)
Contribution margin ratio | % | ||
Variable cost ratio | % |
(b1)
Compute breakeven sales.(Use the rounded contribution margin ratio calculated in the previous part to compute breakeven sales.)
Breakeven sales | $ |
(b2)
What is Cullumber's margin of safety?
Margin of safety | $ |
(c)
If Cullumber's sales were to increase by $100,000with no change in fixed expenses, by how much would operating income increase?(Use the rounded contribution margin ratio calculated in the previous part to compute breakeven sales.)
Net Operating income will increase by | $ |
(d)
Cullumber's managers have determined that variable costs per unit will increase by15% beginning next month. To offset this increase in costs, they are considering a12% increase in the sales price. Market research indicates that the price increase will result in a3% decrease in the number of learning systems Cullumber sells. What will be Cullumber's expected operating income if the price increase is implemented?(Round per unit calculations to 2 decimal places e.g. 52.75 and final answer to 0 decimal places, e.g. 5,275.)
Operating income | $ |
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