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Gary's Steel Parts produces parts for the automobile industry. The company has monthly foed expenses of $600,000 and a contribution margin of 70% of revsnues.

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Gary's Steel Parts produces parts for the automobile industry. The company has monthly foed expenses of $600,000 and a contribution margin of 70% of revsnues. Gary feels ike he's in a giant squeeze play. The automotive manufacturers are demanding lower prices, and the steel producers have increased raw maserial costs. Gacy's contribution margin has atrunk to foys of revenues. The oompany/' monthly operating income, prior to these pressures, was $135,000. Requirement 1. To maintain this same levei of profa, what sales volume (in soles revenve) must Gary now achiove? Begin by identifying the formula to compute the sales in units at various levels of operating income using the contibution margin asproach. produces parts for the automobile industry. The company has monthly fixed expenses of $600,000 and a contributio automotive manufacturers are demanding lower prices, and the steel producers have increased raw material costs. inthly operating income, prior to these pressures, was $135,000. Requirements 1. To maintain this same level of profit, what sales volume (in sales revenue) must Gary now achieve? 2. Gary believes that his monthly sales revenue will only go as high as $1,050,000. He is thinking about moving operations overseas to cut fixed costs. If monthly sales are $1,050,000, by how much will he need to cut fixed costs to maintain his prior profit level of $135,000 per month

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