Graham's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $$640,000$ and a contribution margin of $95\%$ of revenues. Graham feels like he's in a giant squeeze play: The automotive manufacturers are demanding lower prices, and the steel producers have increased raw material costs. Graham's contribution margin has shrunk to $75\%$ of revenues. The company's monthly operating income, prior to these pressures, was $$338,500.$

Read the requirements.

Requirement $1.$ To maintain this same level of profit, what sales volume $($in sales revenue$)$ must Graham now achieve?

Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach.

$($

Operating income

Fixed expenses

$+$ Contribution margin ratio

$=$ Target sales in dollars

$($Round your answer up to the nearest whole dollar.$)$

Graham mus$$ now achieve sales of to maintain the same level of $p$

Requirements

To maintain this same level of profit, what sales volume $($in sales revenue$)$ must Graham now achieve?

Graham believes that his monthly sales revenue will only go as high as $$1,030,000.$ He is thinking about moving operations overseas to cut fixed costs. If monthly sales are $$1,030,000,$ by how much will he need to cut fixed costs to maintain his prior profit level of $$338,500$ per month?