SPORTCO Inc. manufactures tennis rackets. Financial results for 2021, a year in which 25,000 rackets were sold, is as follows: Sales revenue Total variable costs Contribution margin Total fixed costs Net income Per Totals Unit $625,000 $ 25 375,000 $ 15 250,000 150,000 $ 100,000 Management is carrying out some planning for 2022 and would like some assistance with performing cost-volume-profit analysis, Required: Consider the following INDEPENDENT situations: {Round all dollar amounts to the nearest dollar) {Round all other calculated amounts to 2 decimal places, if applicable) 1.) (a) If the current selling price and cost structure remains the same for 2022 and total output is expected to remain the same for 2022, calculate the margin of safety in units for 2022. (4 marks) 1.) 2.) (a) If the current selling price and cost structure remains the same for 2022 and total output is expected to remain the same for 2022, calculate the margin of safety in units for 2022. (4 marks) (b) Using one word only, what does the margin of safety provide a basic assessment of? (1 mark) Refer to original data. Management is considering changing its warehouse location for 2022. This would decrease annual rent costs by $20,000. If no other factors change, what total level of sales revenue must be generated in 2022 if management wishes to earn a total net income of $260,000 in 2022? (show all work) (Note: Do not calculate the number of rackets (units) to achieve this). (4 marks) Refer to original data. Management has been notified that there will be an increase in materials cost by $3.00 per racket for 2022. In an attempt to combat this cost increase, management has decided to increase the selling price per tennis racket by 20%. If no other factors change, how many tennis rackets need to be sold in 2022 in order for the company to break-even? (show all work) (5 marks) Complete the following phrase that was mentioned many times while covering this topic: "So long as fixed costs do not change, whatever happens to contribution margin.... happens to _." (Provide your answer on your answer pages) (1 mark) 3.) 4.) 3 DEFLEP Company just completed its 2021 operating year and earned net income of $50,000. In 2021, the company sold only one type of product at a selling price of $100 and it had a variable cost of $60 per unit. These unit amounts and all other costs are not expected to change for 2022. Required: The Sales and Marketing department believes they can sell 800 more units in 2022 than was sold in 2021. If this can be done..... 1.) By how much will the net income increase in 2022? 2.) What is the total net income expected for 2022? (Show all calculations)
