Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $690,000 and a contribution margin of 80% of revenues.

feels like he's in a giant squeeze play: The automotive manufacturers are demanding lower prices, and the steel producers have increased raw material costs.

contribution margin has shrunk to 50% of revenues. The company's monthly operating income, prior to these pressures, was $166,000.

1.To maintain this same level of profit, what sales volume (in sales revenue) must now achieve?

Begin by identifying the formula to compute the sales in dollars at various levels of operating income using the contribution margin approach.

+

) /

=

Target sales in dollars

(Round your answer up to the nearest whole dollar.)

Grovermust now achieve sales of $ ___ to maintain the same level of profit.

2. If monthly sales are __ by how much will he need to cut fixed costs to maintain his prior profit level of __ per month?

Fixed expenses can only be $__ in order to maintain the prior profit level of $166,000 per month. Therefore, Grover will have to save at least $ ___ per month in fixed costs by moving operations overseas if he plans to maintain his prior profit level.