Richardson Radio Company manufactures small radios. Last year the company sold 25,000 units results. 12 125 Sales 15 Variable costs 15 $375,000 Fixed costs 150,000 525,000 Operating income $100,000 $625,000 25,00 In an attempt to improve its product, the company CFO has made some suggestions. He suggests replacing a component part that has a cost of $2.50 with a new and better part costing $4.50 per unit in the coming year. A new machine would also be needed to increase plant capacity and would increase fixed costs by $3,000 a year. (Always return to the original data unless otherwise stated.) tinn murin ? Tntal contribution margin? 9. Richardson Radio Company holds the sales price constant and makes the suggested changes, how many units of product must be sold in the coming year to break even? TH-VC-FC = profit 153 000 10. If the suggested changes are made, how many units of product would the company have had to sell to cam $140,000? 11. If the firm holds the sales price constant and makes the suggested changes, how many units of product will the company have to sell to make a net income of $100,000 (assume a 20% tax rate) 12. If Richardson makes the suggested changes, what selling price must be charged to make the same profit as last year? 13. What was Richardson's margin of safety in dollars and % last year? If Richardson makes the suggested changes this year and sells 25,000 units, what will be the margin of safety in dollars and this year? 14. What was Richardson's degree of operating leverage last year? If Richardson makes the suggested changes this year and sells 25,000 units, what will be the degree of operating leverage? 250,000 2.5 100,000 Check figures: 5. 29,000 units 9. 19,125 unit