MochaInternational Company [MIC], makes and sells specialized software for various computer applications. Sales have been somewhat erratic over the most recent period.

Product TW is being reviewed :

Sales - 12,500 units:$300,000

Variableexpenses180,000

ContributionMargin120,000

FixedCosts130,000

Net Operating Loss$(10,000)

You are the Managerial Accountant for Mocha, and have been asked to review the following options available to Mocha Int'l:

Part A

Before proceeding you must determine the following, and also explain why this information is useful:

a)The break-even point in sales units and dollars

b)The margin of safety and the degree of operating leverage

Part B

Following are suggestions made by various members of the Sales & Management committee:

Sales and Marketing has suggested as follows:

1. An increase of $8,000 in advertising that can increasemonthly sales by $70,000
2. Current Sales can be doubled byreducing selling price by 10%, and increasing monthly advertising by $35,000
3. An ad agency has suggested new enhanced packaging, costing $0.60 per unit, would increase sales units by 2,445

As Managerial Accountant, you are asked to calculate the effect of each of the above suggestions andprovide a brief explanation of the value of each one. [You must be objective in presenting the three options]

The maximum capacity is 50,000 units. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year.

The following budget data are available:

Variable Cost

Per Unit Sold

Monthly Fixed Cost

Sales Commissions

$1.70

Shipping

$1.20

Advertising

$0.20

$15,000

Executive Salaries

-

$45,000

Depreciation on Office Equipment

-

$11,000

Other - all cash/payables

$0.20

$19,000

Estimated Bad debts -2%ofcredit sales- Average monthlycredit sales for the last half of the year - $75,000)[Treat as anon-cashFixed cost]

All cash expensesare paid in cash in the month for which they are incurred.

A

If the company has budgeted to sell 35,000 units of Product SW in July, what will

be thetotalbudgeted selling and administrative expenses forJuly?Answer:

b.

If the company has budgeted to sell 36,000 units of Product SW in October, what

will be thetotal budgeted variableselling and administrative expenses forOctober?Answer:

c.

If the budgetedcashdisbursements for selling and administrative expenses for

November total $125,250, then how many units of Product SW does the company

plan to sell in November (rounded to the nearest whole unit)?

Answer:

d.

If the company has budgeted to sell 40,000 units of Product SW in September,

what will be thetotal budgetedselling and administrative expenses for

the month? Answer: