Question
Monterey Co. makes and sells a single product. The current selling price is $17 per unit. Variable expenses are $10.2 per unit, and fixed expenses
Monterey Co. makes and sells a single product. The current selling price is $17 per unit. Variable expenses are $10.2 per unit, and fixed expenses total $39,380 per month.
a. Calculate the breakeven point expressed in terms of total sales dollars and sales volume. (Do not round intermediate calculations.)
b. Calculate the margin of safety and the margin of safety ratio. Assume current sales are $115,450. (Do not round intermediate calculations. Round your percentage answer to 2 decimal places.)
c. Calculate the monthly operating income (or loss) at a sales volume of 5,350 units per month. (Do not round intermediate calculations.)
d. Calculate monthly operating income (or loss) if a $2 per unit reduction in selling price results in a volume increase to 8,100 units per month. (Do not round intermediate calculations.)
f-1. Calculate the monthly operating income (or loss) that would result from a $1 per unit price increase and a $6,000 per month increase in advertising expenses, both relative to the original data. Assume a sales volume of 5,350 units per month. (Do not round intermediate calculations.)
Management is considering a change in the sales force compensation plan. Currently each of the firm's two salespeople is paid a salary of $2,500 per month. g-1. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $1 per unit, assuming a sales volume of 5,350 units per month. (Do not round intermediate calculations.)
g-2. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $1 per unit, assuming a sales volume of 6,100 units per month. (Do not round intermediate calculations. Losses should be indicated by a minus sign.)
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