Question
Question based on modified problems 3.3 from the reference text [Flynn (2009)] from page 78 of the textbook: Polymerco, a North American manufacturer of specialty
Question based on modified problems 3.3 from the reference text [Flynn (2009)] from page 78 of the textbook:
Polymerco, a North American manufacturer of specialty polymers, has the following highly condense income statement, given in the table below. There current sales are to North American customers only. The president casually mentions that it would be nice to have more offshore sales to diversity the company.
Polymerco Income Statement | ||
This year ($000) | Last year ($000) | |
Gross sales | 26518 | 24818 |
Bad debt | nil | nil |
Net sales | 26518 | 24818 |
COGS | 22,243 | 21,341 |
Contribution margin | 4275 | 3477 |
CM(%) | 16.1% | 14% |
SG&A | 2,122 | 2,067 |
Operating income | 2153 | 1410 |
Other income and interest on long-term debt | -60 | -50 |
Net income | 2093 | 1360 |
(a) if Polymerco's production is running at 84% capacity, what is the MAXIMUM DISCOUNT in percentage that you can provide?
(b) if Polymerco's production is running at 100% capacity, how much percentage of DISCOUNT can you provide without reducing the profitability?
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