+ me File Edit View History Bookmarks People Tab Window Help Topic: Group 5 discussio X Connect Topic: Peer Response Po X C Solved: In what way is a C Due To Erratic Sales Of it x Co ezto.mheducation.com/ext/map/index.html?_con-con&external_browser=0&launchUrl=https%253A%252F%252Fne... Chapter Five Problems (10 pts.) Seved Help Save & Exit Submit Check my work 3 Problem 5-29 Changes in Cost Structure; Break-Even Analysis: Operating Leverage; Margin of Safety [LO5-4, LOS-5, LO5-7, LO5-8) 3.34 points Morton Company's contribution format income statement for last month is given below: eBook Sales (50,000 unite * $27 per unit) Variable expenses Contribution margin Pixed expenses Net operating income $ 1,350,000 945,000 405,000 324,000 81,000 s Print References The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: 1. New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $8.10 per unit. However, fixed expenses would increase to a total of $729,000 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. 2. Refer to the income statements in (1). For the present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollar sales, and (c) the margin of safety in dollars and the margin of safety percentage. 3. Refer again to the data in (1). As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that enough funds are available to make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach would increase unit sales by 30% without any change in selling price, the company's new monthly fixed expenses would be $517050; and its net operating Income would increase by 20%. Compute the company's break even point in dollar sales under the new marketing strategy e Problems (10 pts.) Saved equipment (Assume ulat enougri Tunus are available to make me purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the strategy should be changed. Rather than pay sales commissions, which are currently included in variable e would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager clai increase unit sales by 30% without any change in selling price; the company's new monthly fixed expenses net operating income would increase by 20%. Compute the company's break-even point in dollar sales und strategy Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Refer to the income statements in (1). For the present operations and the proposed new operations, compute (a break-even point in dollar sales, and (c) the margin of safety in dollars and the margin of safety percentage. (DC your percentage answers to 2 decimal places (i.e. .1234 should be entered as 12.34).) Present Proposed b. a. Degree of operating leverage Break-even point in dollar sales c. Margin of safety in dollars Margin of safety in percentage % % ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fne... a Saved ve Problems (10 pts.) Help Save C equipment Sume ulat enougn Tunus are available to make uie purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach w increase unit sales by 30% without any change in selling price; the company's new monthly fixed expenses would be $517,050; an net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses $8.10 per unit. However, fixed expenses would increase to a total of $729,000 each month. Prepare two contribution format income sta present operations and one showing how operations would appear if the new equipment is purchased. (Round "Per Unit" to 2 decimal pl. Morton Company Contribution Income Statement Present Proposed Amount Per Unit % Amount Per Unit Sales 1,350,000 $ 27.00 100% $ 1,350,000 $ 27.00 100% Variable expenses 945,000 18.90 70% 540,000 10.80 40% Contribution margin 405,000 $ 8.10 30 % 810,000 $ 16.20 60% Fixed expenses 324,000 729,000 Net operating income $ 81,000 $ 81.000 Required Required 2 > equipment (Assume ulat erouyri lurus are avaldule lo mdke ve purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the strategy should be changed. Rather than pay sales commissions, which are currently included in variable e would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager clai increase unit sales by 30% without any change in selling price; the company's new monthly fixed expenses net operating income would increase by 20%. Compute the company's break-even point in dollar sales un strategy 5 Complete this question by entering your answers in the tabs below. Book Print erences Required 1 Required 2 Required 3 Required 4 they Refer again to the data in (1). As a manager, what factor would be paramount in your mind in deciding whether that enough funds are available to make the purchase.) Cyclical movements in the economy Reserves and surplus of the company OPerformance of peers in the industry Stock level maintained onnect Topic: Group 5 discussio! X Topic: Peer Response Po X C Due To Erratic Sales Of It X Solve ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fne... ter Five Problems (10 pts.) Saved Help m equipmen! Assume uial enouyn Tunus are avantie w make the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's market strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the come would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approa increase unit sales by 30% without any change in selling price; the company's new monthly fixed expenses would be $517,05 net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marke strategy. Complete this question by entering your answers in the tabs below. Book Required 1 Required 2 Required 3 Required 4 Print Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's marketing stran Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed heavily in advertising. The marketing manager claims this new approach would increase unit sales by 30% without any change in s new monthly fixed expenses would be $517,050; and its net operating income would increase by 20%. Compute the company's bre sales under the new marketing strategy. (Do not round intermediate calculations. Round your answer to the nearest whole dollar ar erences New break even point in dollar sales Drau 3 of HA