Questions:

1-Prepare a contribution margin income statement

2-Compute company's contribution margin per unit and contribution percentage

3-Calculate the company's breakeven point in units.

4-Calculate the company's breakeven point in sales dollars.

5- Put all personnel on commission. This action would affect the sales salaries and commission expense by eliminating the fixed portion and increasing the variable portion by $2.25 per unit. Sales would increase by 20,000 units.

6- Redesign the package for the product. This would decrease the variable direct materials cost by $0.75 per unit but would increase the fixed factory overhead by $15,000.

7-Launch a new advertising campaign. This would increase fixed advertising expense by $90,000 but would increase sales volume by 2,000 units.

8-Reduce the selling price of the product by $7.50 per unit. This would increase sales volume by 7,000 units.

9-Use the company's contribution margin percentage to make this calculation

Parameters for Baseline

# of units sold 150,000

Selling price per unit $220,000

Fixed expenses Variable expenses per unit sold

Production costs:

Direct Materials $16.00

Direct labor $32.00

Factory Overhead $2,2360,000 $22.00

Marketing expenses:

Sales salaries and commissions $520,000 $6.50

Advertising $320,000

Miscellaneous mktg. expenses $120,000

Administration expenses:

Office salaries $650,000

Supplies $103,000 $2.00

Miscellaneous admin. expenses $75,000

TOTAL EXPENSES $4,148,000 $78.50

1- Put all personnel on commission. This action would affect the sales salaries and commission expense by eliminating the fixed portion and increasing the variable portion by $2.25 per unit. Sales would increase by 20,000 units.

2- Redesign the package for the product. This would decrease the variable direct materials cost by $0.75 per unit but would increase the fixed factory overhead by $15,000.

3-Launch a new advertising campaign. This would increase fixed advertising expense by $90,000 but would increase sales volume by 2,000 units.

4-Reduce the selling price of the product by $7.50 per unit. This would increase sales volume by 7,000 units.