Scenario: Best Quality (BQ) manufacturers and sells food processors. BQ sells its food processors to restaurants and supermarkets employing an internal sales staff who are paid on sales commissions. Assume the FY 2020 financial performance for Best Quality is as follows:

	FY 2020
Sales	$1,950,000.00
COGS	$1,260,500.00
Gross Margin	$689,000.00
SG&A Expenses*	$338,500.00
*includes sales commissions. Other SG&A expenses do not vary with sales.
Operating Profit	$351,000.00
Aver Sales Price per unit	$195.00
Sales Commission as a % of revenue	8%
Variable Mfg Cost % per unit	40%
Fixed Mfg. Cost per unit	$48.05
Fixed SG&A	$182,500.00

Carefully calculate the correct values for the questions below. Show your work/assumptions.

A) What is the sales volume, in units, needed to achieve an operating profit of 20%?

B) Assume Best Quality's FY 2020 Contribution Margin was $1,016,500 and its Degree of Operating Leverage was 3.2. If FY2020 revenues of $2,050,000 were to decline to $1,947,500 in FY 2021, what would be the % operating profit decline from 2020 to 2021? (Enter answer as a decimal not as a %)

Carefully calculate the correct values for the question below in order to select the correct answer. Show your work/assumptions.

C) In early 2021, Best Quality (BQ), acquired Rock-Food (RF), a maker of ultra-high-speed food processors. At the time of the acquisition, RF had annual revenues of $800,000 on an annual unit volume of 2,000. RF's variable cost % was 56% and their fixed costs were $500,000. Best Quality believed that by employing their operating and marketing expertise, they could, by the end of FY 2021, grow RF's revenues by 20%, (at the same unit sales price), reduce its variable costs to 50%, all while keeping RF's fixed costs flat with their pre-acquisition level.

If BQ were able to achieve these revenue growth and cost reduction targets for RF by the end of FY 2021, which statement below would be correct?

• RF's operating losses would improve by $128,000, but their revenues would still short of breakeven by $136,363.64
• RF's operating losses would improve by $20,000, but their revenues would still be short of breakeven by $40,000
• RF's operating losses would improve by $128,000, but their revenues would still be short of breakeven by $40,000
• RF's total variable costs would grow by $32,000, but their revenues would still be short of breakeven by $128,000
• RF's contribution margin would grow by $32,000 and their revenues would exceed breakeven by $160,000
• None of the above

Select the answer choice that correctly completes the statements

D) When production volume increases by 10%...

• Variable Cost $ / unit will remain fixed, while Fixed Cost $ / unit will decrease
• Variable Cost $ / unit will increase, while Fixed Cost $ / unit will remain fixed
• Variable Cost $ / unit will increase by 10% while Fixed Cost $ / unit will decrease by 9.09%
• Variable Cost $ / unit and Fixed Cost $ / unit will remain the same
• Variable Cost $ / unit will increase by 9.09% while Fixed Cost $ / unit will decrease by 9.09%
• None of the above

E) When production volume decreases by 10%...

• Total Variable Costs will decrease by 10%, while Fixed Cost $ / unit will decrease by 9.09%
• Variable Cost $ / unit will decrease by 9.09% while Fixed Cost $ / unit will remain fixed
• Variable Cost $ / unit will remain fixed, while Total Fixed Costs will also remain fixed
• Total Variable Costs will decrease by 10%, while Fixed Cost $ / unit will increase by 9.09%
• Variable Cost $ / unit will decrease by 11.1% while Fixed Cost $ / unit will increase by 11.1%
• None of the above