Question
Genesis Company manufactures and sells for high tech geological enviroment. The company's contribution format income statement for 2020 given is below. Sales (40,000 units) $2,400,000
Genesis Company manufactures and sells for high tech geological enviroment. The company's contribution format income statement for 2020 given is below.
Sales (40,000 units) $2,400,000
Variable expenses 1,800,000
Contribution Margin ?
Fixed Expenses 480,000
Net Operating Income ?
Management is anxious to increase company's profit and has asked for analysis of a number of items.
1. Compute the company's CM ratio and variable expenses ratio.
2. Compute the company's breakeven point in both unit sales and dollar sales.
3. Assume that sales increase by $800,000 next year. If cost behavior patterns remain unchanged, by how much will the company's net operating income will increase? Use the CM ratio to compute your anserw.
4. Refer to the orginal data. Assume that next year, Management wants the company to earn at least $180,000. How many will have to be sold to earn this target profit?
5. Refer to the original data. Compute the company's margin of safety in both dollar and percentage form.
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