PART IV COST-VOLUME-PROFIT

Walton Widgets manufactures a product that sells for $40 per unit. Walton incurs a variable cost per unit of $24 and $1,400,000 in total fixed costs to produce this product. It is currently selling 92,000 units.

Instructions: Complete each of the following requirements, presenting labeled supporting computations.

(a) Compute and label the unit contribution margin and contribution margin ratio.

(b) Using the unit contribution margin, compute the break-even point in units.

(c) Using the contribution margin ratio, compute the break-even point in dollars

(d) Compute the margin of safety and margin of safety ratio.

(e) Compute the number of units that must be sold in order to generate net income of $240,000 using the unit contribution margin.

(f) Should Walton Widgets give a commission to its salesmen based on 8% of sales, if it will decrease fixed costs by $300,000 and increase sales volume 10%? Support your answer with labeled computations.