Homework: Chapter 20 Homework Save Score: 0.61 of 1 pt 4 of 4 (4 complete) HW Score: 90.28%, 3.61 of 4 pts P20-40A (similar to) Question Help Diversified Investor Group is opening an office in Portland, Oregon. Fixed monthly costs are office rent (58,500), depreciation on office furniture ($1,800), utilities ($2,400), special telephone lines (S1,100), a connection with an online brokerage service ($2,500), and the salary of a financial planner (54,700). Variable costs include payments to the financial planner (8% of revenue), advertising (13% of revenue), supplies and postage (3% of revenue), and usage fees for the telephone lines and computerized brokerage service (6% of revenue). Read the requirements. Requirement 1. Use the contribution margin ratio approach to compute Diversified's breakeven revenue in dollars. If the average trade leads to $750 in revenue for Diversified, how many trades must be made to break even? Begin by showing the formula and then entering the amounts to calculate the required sales dollars for Diversified to break even. (Abbreviation used: CM = contribution margin.) Fixed costs + Target profit ) / CM ratio = Required sales in dollars ($ 21,000 + $ 0 )/ 70 % $ 30,000 -X Diversified must make 40 trades to break even. Requirements monthly target profit of $10,500 Requirement 2. Use the equation approach to compute the dollar revenues needed to earn Begin by selecting the formula to compute the required sales in units to earn a target profit. Net sales revenue Variable costs Fixed costs Target profit Rearrange the formula you determined above and compute the required number of trades to earn a monthly target profit of $10,500. Diversified must make trades to earn a monthly operating income of $10,500. 1. Use the contribution margin ratio approach to compute Diversified's breakeven revenue in dollars. If the average trade leads to $750 in revenue for Diversified, how many trades must be made to break even? 2. Use the equation approach to compute the dollar revenues needed to earn a monthly target profit of $10,500. 3. Graph Diversified's CVP relationships. Assume that an average trade leads to $750 in revenue for Diversified. Show the breakeven point, the sales revenue line, the fixed cost line, the total cost line, the operating loss area, the operating income area, and the sales in units (trades) and dollars when monthly operating income of $10,500 is earned. 4. Suppose that the average revenue Diversified earns increases to $1,250 per trade. Compute the new breakeven point in trades. How does this affect the breakeven point? (Round your answers to the nearest whole number.) Print Done Enter any number in the edit fields and then click Check
