**SEE SCREEN SHOTS ATTACHED*** Depardieu Company., produces drone video helicopters for recreational surveillance. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company's contribution format income statement for the most recent month is given below: Sales (12,900 units at $40 per unit) $ 516,000 Variable expenses 309,600 Contribution margin 206,400 Fixed expenses 230,400 Net operating loss $ (24,000) Required: 1. Compute the company's CM ratio and its break-even point in both units and dollars. (Omit the "%" and "$" signs in your response.) CM ratio % Break-even point in units Break-even point in dollars $ 2. The sales manager feels that an $6,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $86,000 increase in monthly sales. If the sales manager is right, what will the revised net operating income or loss? (Use the incremental approach in preparing your answer.) (Omit the "$" sign in your response.) is $ 3. Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $38,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted? (Input all amounts as positive values except losses which should be indicated by minus sign. Omit the "$" sign in your response.) Contribution Income Statement $ $ 4. Refer to the original data. The company?s advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $0.40 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $5,000? (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.) Sales units 5. Refer to the original data. By automating, the company could slash its variable expenses in half. However, fixed costs would increase by $116,000 per month. a. Compute the new CM ratio and the new break-even point in both units and dollars. (Do not round intermediate calculations. Round your final answers to the nearest whole number. Omit the "%" and "$" signs in your response.) CM ratio % Break-even point in units Break-even point in dollars $ b. Assume that the company expects to sell 20,600 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Omit the "$" and "%" signs in your response.) Not Automated Automated Total Per Unit % Total Per Unit % $ $ $ $ $ $ Kathleen Sebilus Inc. contribution format income statement for the most recent month is given below: Sales (47,000 units) $ 987,000 Variable expenses 690,900 Contribution margin 296,100 Fixed expenses 236,880 Net operating income $ 59,220 The industry in which Kathleen Sebilus Inc. operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: 1. New equipment has come on the market that would allow Kathleen Sebilus Inc. to automate a portion of its operations. Variable expenses would be reduced by $6.30 per unit. However, fixed expenses would increase to a total of $532,980 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. (Input all amounts as positive values except losses which should be indicated by minus sign. Round your "Per unit" answers to 2 decimal places. Omit the "$" and "%" signs in your response.) Present Proposed Amount Per Unit % Amount Per Unit % $ $ % $ $ % $ % $ % $ $ 2. Refer to the income statements in (1) above. For both present operations and the proposed new operations, Compute: a. The degree of operating leverage. Present Proposed Degree of operating leverage b. The break-even point in dollars. (Omit the "$" sign in your response.) Present Proposed Break-even point in dollars $ $ c. The margin of safety in both dollar and percentage terms. (Omit the "$" and "%" signs in your response.) Present Proposed Margin of safety in dollars $ $ Margin of safety in percentage % % 3. Refer again to the data in (1) above. As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that ample funds are available to make the purchase.) Stock level maintained Cyclical movements in the economy Reserves and surplus of the company Performance of peers in the industry 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company?s marketing strategy should be changed. Instead of paying sales commissions, which are included in variable expenses, the marketing manager suggests that salespersons be paid fixed salaries and that the company invest heavily in advertising. The marketing manager claims that this new approach would increase unit sales by 50% without any change in selling price; the company?s new monthly fixed expenses would be $296,100; and its net operating income would increase by 25%. Compute the break-even point in dollar sales for the company under the new marketing strategy. (Omit the "$" sign in your response.) New break even point in dollar sales $ check my workeBook Links (4)references $ $

Depardieu Company Sales (12,900 units at $40 per unit) $516,000 Variable expenses $309,600 Contribution margin $206,400 Fixed expenses $230,400 1. Compute the company's CM ratio and its break-even point in both units and dollars. (Omit Net operating loss -$24,000 the "%" and "$" signs in your response.) CM ratio % Break-even point in units Break-even point in dollars $ CM ratio 40.00% Break-even point in units 14,400 Break-even point in dollars $576,000 2. The sales manager feels that an $6,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $86,000 increase in monthly sales. If the sales manager is right, what will the revised net operating income or loss? (Use the incremental approach in preparing your answer.) (Omit the "$" sign in your response.) Present Proposed Amount Per Unit Amount Per Unit Sales (12,900 units at $40 per unit) $516,000 $40.00 $602,000 $40.00 Variable expenses $309,600 $24.00 $361,200 $24.00 Contribution margin $206,400 $16.00 $240,800 $16.00 Fixed expenses $230,400 $17.86 $236,400 $15.71 Net operating Income / (loss) -$24,000 -$1.86 $4,400 $0.29 Revise net operating income $4,400 3. Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $38,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted? (Input all amounts as positive values except losses which should be indicated by minus sign. Omit the "$" sign in your response.) Present Proposed Amount Per Unit Amount Per Unit Sales (12,900 units at $40 per unit) $516,000 $40.00 $928,800 $36.00 Variable expenses $309,600 $24.00 $619,200 $24.00 Figures in Contribution margin $206,400 $16.00 $309,600 $12.00 Green are Fixed expenses $230,400 $17.86 $268,400 $10.40 to be filled Net operating Income / (loss) -$24,000 -$1.86 $41,200 $1.60 4. Refer to the original data. The company's advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $0.40 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $5,000? (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.) Present Varriable cost $24.00 will increase by $0.40 per unit. Hence the contribution per unit will be revised to $15.60 per unit. To earn a profit of $5,000, total contribution needed is $230,400 + 5,000 = $235,400. Hence contribution needed $235,400 Contribution per unit $15.60 Units to be sold 15,090 a. Compute the new CM ratio and the new break-even point in both units and dollars. (Do not round intermediate calculations. Round your final answers to the nearest whole number. Omit the "%" and "$" signs in your response.) CM ratio % 5. Refer to the original data. By automating, the company could slash its variable expenses inBreak-even point in units would increase by $116,000 per month. half. However, fixed costs Break-even point in dollars $ Sales (12,900 units at $40 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss CM ratio Break-even point in units Break-even point in dollars $516,000 $154,800 $361,200 $346,400 $14,800 70.00% 12,371 $494,857 b. Assume that the company expects to sell 20,600 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Omit the "$" and "%" signs in your response.) Sales (20,600 units at $40 per unit) Variable expenses Contribution margin Fixed expenses Net operating Income / (loss) Not Automated Amount Per Unit $824,000 $40.00 $494,400 $24.00 $329,600 $16.00 $230,400 $11.18 $99,200 $4.82 % 100.00% 60.00% 40.00% 27.96% 12.04% Automated Amount Per Unit $824,000 $40.00 $247,200 $12.00 $576,800 $28.00 $346,400 $16.82 $230,400 $11.18 % 100.00% 30.00% 70.00% 42.04% 27.96% 1. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. Kathleen Sebilus Inc Sales Variable expense Contribution Margin Fixed expenses Net Operating Income Present Amount Per unit % $987,000 $21.00 100.00% $690,900 $14.70 70.00% $296,100 $6.30 30.00% $236,880 $5.04 24.00% $59,220 $1.26 6.00% Proposed Amount Per unit % $987,000 $21.00 100.00% $394,800 $8.40 40.00% $592,200 $12.60 60.00% $532,980 $11.34 54.00% $59,220 $1.26 6.00% 2. Refer to the income statements in (1) above. For both present operations and the proposed new operations, Compute: a. The degree of operating leverage. Present Proposed Degree of operating leverage b. The break-even point in dollars. (Omit the "$" sign in your response.) Present Proposed Break-even point in dollars Kathleen Sebilus Inc Sales Variable expense Contribution Margin Fixed expenses Net Operating Income Present Amount Per unit % $987,000 $21.00 100.00% $690,900 $14.70 70.00% $296,100 $6.30 30.00% $236,880 $5.04 24.00% $59,220 $1.26 6.00% Proposed Amount Per unit % $987,000 $21.00 100.00% $394,800 $8.40 40.00% $592,200 $12.60 60.00% $532,980 $11.34 54.00% $59,220 $1.26 6.00% Degree of Operating leverage Present 500.00% 5.00 Proposed 1000.00% 10.00 Breakeven point in dollars $789,600 $888,300 Margin of safety in dollars $197,400 $98,700 20.00% 10.00% Margin of safety in percentage 3. Refer again to the data in (1) above. As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that ample funds are available to make the purchase.) Stock level maintained Cyclical movements in the economy Reserves and surplus of the company Performance of peers in the industry Performance of peers in the industry 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's marketing strategy should be changed. Instead of paying sales commissions, which are included in variable expenses, the marketing manager suggests that salespersons be paid fixed salaries and that the company invest heavily in advertising. The marketing manager claims that this new approach would increase unit sales by 50% without any change in selling price; the company's new monthly fixed expenses would be $296,100; and its net operating income would increase by 25%. Compute the break-even point in dollar sales for the company under the new marketing strategy. Kathleen Sebilus Inc Sales Variable expense Contribution Margin Fixed expenses Net Operating Income Present Amount Per unit % $987,000 $21.00 100.00% $690,900 $14.70 70.00% $296,100 $6.30 30.00% $236,880 $5.04 24.00% $59,220 $1.26 6.00% New Net Income Add: Revised Fixed Costs Contribution Margin Sales Contribution Margin ratio Revised Breakeven point in dollars $74,025 $296,100 $370,125 $1,480,500 25.00% $1,184,400 Depardieu Company Sales (12,900 units at $40 per unit) $516,000 Variable expenses $309,600 Contribution margin $206,400 Fixed expenses $230,400 1. Compute the company's CM ratio and its break-even point in both units and dollars. (Omit Net operating loss -$24,000 the "%" and "$" signs in your response.) CM ratio % Break-even point in units Break-even point in dollars $ CM ratio 40.00% Break-even point in units 14,400 Break-even point in dollars $576,000 2. The sales manager feels that an $6,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $86,000 increase in monthly sales. If the sales manager is right, what will the revised net operating income or loss? (Use the incremental approach in preparing your answer.) (Omit the "$" sign in your response.) Present Proposed Amount Per Unit Amount Per Unit Sales (12,900 units at $40 per unit) $516,000 $40.00 $602,000 $40.00 Variable expenses $309,600 $24.00 $361,200 $24.00 Contribution margin $206,400 $16.00 $240,800 $16.00 Fixed expenses $230,400 $17.86 $236,400 $15.71 Net operating Income / (loss) -$24,000 -$1.86 $4,400 $0.29 Revise net operating income $4,400 3. Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $38,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted? (Input all amounts as positive values except losses which should be indicated by minus sign. Omit the "$" sign in your response.) Present Proposed Amount Per Unit Amount Per Unit Sales (12,900 units at $40 per unit) $516,000 $40.00 $928,800 $36.00 Variable expenses $309,600 $24.00 $619,200 $24.00 Figures in Contribution margin $206,400 $16.00 $309,600 $12.00 Green are Fixed expenses $230,400 $17.86 $268,400 $10.40 to be filled Net operating Income / (loss) -$24,000 -$1.86 $41,200 $1.60 4. Refer to the original data. The company's advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $0.40 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $5,000? (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.) Present Varriable cost $24.00 will increase by $0.40 per unit. Hence the contribution per unit will be revised to $15.60 per unit. To earn a profit of $5,000, total contribution needed is $230,400 + 5,000 = $235,400. Hence contribution needed $235,400 Contribution per unit $15.60 Units to be sold 15,090 a. Compute the new CM ratio and the new break-even point in both units and dollars. (Do not round intermediate calculations. Round your final answers to the nearest whole number. Omit the "%" and "$" signs in your response.) CM ratio % 5. Refer to the original data. By automating, the company could slash its variable expenses inBreak-even point in units would increase by $116,000 per month. half. However, fixed costs Break-even point in dollars $ Sales (12,900 units at $40 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss CM ratio Break-even point in units Break-even point in dollars $516,000 $154,800 $361,200 $346,400 $14,800 70.00% 12,371 $494,857 b. Assume that the company expects to sell 20,600 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Omit the "$" and "%" signs in your response.) Sales (20,600 units at $40 per unit) Variable expenses Contribution margin Fixed expenses Net operating Income / (loss) Not Automated Amount Per Unit $824,000 $40.00 $494,400 $24.00 $329,600 $16.00 $230,400 $11.18 $99,200 $4.82 % 100.00% 60.00% 40.00% 27.96% 12.04% Automated Amount Per Unit $824,000 $40.00 $247,200 $12.00 $576,800 $28.00 $346,400 $16.82 $230,400 $11.18 % 100.00% 30.00% 70.00% 42.04% 27.96% 1. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. Kathleen Sebilus Inc Sales Variable expense Contribution Margin Fixed expenses Net Operating Income Present Amount Per unit % $987,000 $21.00 100.00% $690,900 $14.70 70.00% $296,100 $6.30 30.00% $236,880 $5.04 24.00% $59,220 $1.26 6.00% Proposed Amount Per unit % $987,000 $21.00 100.00% $394,800 $8.40 40.00% $592,200 $12.60 60.00% $532,980 $11.34 54.00% $59,220 $1.26 6.00% 2. Refer to the income statements in (1) above. For both present operations and the proposed new operations, Compute: a. The degree of operating leverage. Present Proposed Degree of operating leverage b. The break-even point in dollars. (Omit the "$" sign in your response.) Present Proposed Break-even point in dollars Kathleen Sebilus Inc Sales Variable expense Contribution Margin Fixed expenses Net Operating Income Present Amount Per unit % $987,000 $21.00 100.00% $690,900 $14.70 70.00% $296,100 $6.30 30.00% $236,880 $5.04 24.00% $59,220 $1.26 6.00% Proposed Amount Per unit % $987,000 $21.00 100.00% $394,800 $8.40 40.00% $592,200 $12.60 60.00% $532,980 $11.34 54.00% $59,220 $1.26 6.00% Degree of Operating leverage Present 500.00% 5.00 Proposed 1000.00% 10.00 Breakeven point in dollars $789,600 $888,300 Margin of safety in dollars $197,400 $98,700 20.00% 10.00% Margin of safety in percentage 3. Refer again to the data in (1) above. As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that ample funds are available to make the purchase.) Stock level maintained Cyclical movements in the economy Reserves and surplus of the company Performance of peers in the industry Performance of peers in the industry 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's marketing strategy should be changed. Instead of paying sales commissions, which are included in variable expenses, the marketing manager suggests that salespersons be paid fixed salaries and that the company invest heavily in advertising. The marketing manager claims that this new approach would increase unit sales by 50% without any change in selling price; the company's new monthly fixed expenses would be $296,100; and its net operating income would increase by 25%. Compute the break-even point in dollar sales for the company under the new marketing strategy. Kathleen Sebilus Inc Sales Variable expense Contribution Margin Fixed expenses Net Operating Income Present Amount Per unit % $987,000 $21.00 100.00% $690,900 $14.70 70.00% $296,100 $6.30 30.00% $236,880 $5.04 24.00% $59,220 $1.26 6.00% New Net Income Add: Revised Fixed Costs Contribution Margin Sales Contribution Margin ratio Revised Breakeven point in dollars $74,025 $296,100 $370,125 $1,480,500 25.00% $1,184,400