Soundbytes, Inc. is a manufacturer of personal sound systems. During 2015, the company

sold 28,000 MP3 players at a sales price of $104 each. Following are the 2015 financial results:

Soundbytes, Inc.

Contribution Format Income Statement

For the Year 2015

Sales

$2,912,000

Less variable costs:

Direct materials

504,000

Direct labor

448,000

Variable overhead

616,000

Total variable costs

1,568,000

Contribution Margin

$1,344,000

Less fixed costs:

880,000

Operating Income

$ 464,000

You are the top managerial accountant at Soundbytes, Inc., and are scheduled to meet with the company's

CEO next week to discuss the financial outlook for 2016. In particular, the CEO will want to know

what steps the company might take to improve its 2016 income performance. You expect to be asked

questions about the impact that various changes in sales price, sales volume, and costs would have

on the company's contribution margin, breakeven point, margin of safety, and income. In addition,

the CEO is likely to ask this question: if we decrease our labor costs by increasing automation, can we

drop our price on MP3 players and increase our sales volume and be better off than in 2015?

Soundbytes, Inc.
Financial Projections - 2016
Inputs:	Section A:		Section B:		Section C:
	2015 Actual		Change Factors		2016 What-If?
Sales in units	28,000		0%		?
Sales price per unit	$ 104.00		0%		?
Direct materials cost per unit	$ 18.00		0%		?
Direct labor cost per unit	$ 16.00		0%		?
Variable overhead cost per unit	$ 22.00		0%		?
Fixed costs	$ 880,000		0%		?
Income Projections:	2015 Actual				2016 What-If?
Sales	?				?
Less variable expenses:
Direct materials	?				?
Direct labor	?				?
Variable overhead	?				?
	____________				____________
Total variable expenses	?				?
	____________				____________
Contribution margin	?				?
Less fixed expenses	?				?
	____________				____________
Operating income	?				?
Contribution margin per unit	?				?
Contribution margin ratio	?				?
Break-even sales in units	?				?
Break-even sales in $$	?				?
Margin of safety in units	?				?
Margin of safety in sales $$	?				?
Degree of operating leverage	?				?

		Name:	__________________________
Soundbytes, Inc.
Financial Projections - 2016
Inputs:	Section A:		Section B:		Section C:
	2015 Actual		Change Factors		2016 What-If?
Sales in units	28,000		10%		30,800
Sales price per unit	$ 104.00		-5%
Direct materials cost per unit	$ 18.00		2%
Direct labor cost per unit	$ 16.00		-20%
Variable overhead cost per unit	$ 22.00		2%
Fixed costs	$ 880,000		18%
Income Projections:	2015 Actual				2016 What-If?
Sales	$ 2,912,000				$ -
Less variable expenses:
Direct materials	504,000				-
Direct labor					-
Variable overhead					-
	____________				____________
Total variable expenses					$ -
	____________				____________
Contribution margin	$ 2,912,000				$ -
Less fixed expenses	$ 880,000				$ -
	____________				____________
Operating income					$ -
Contribution margin per unit					$ -
Contribution margin ratio
Break-even sales in units
Break-even sales in $$
Margin of safety in units
Margin of safety in sales $$
Degree of operating leverage