Stewart's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $640,000 and a contribution margin of 70% of revenues. Stewart feels likehe's in a giant squeezeplay: The automotive manufacturers are demanding lowerprices, and the steel producers have increased raw material costs. Stewart's contribution margin has shrunk to 40% of revenues. Thecompany's monthly operatingincome, prior to thesepressures, was $95,000.

Read the requirementsLOADING...

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Requirement 1. To maintain this same level ofprofit, what sales volume(in salesrevenue) must Stewart nowachieve? (Round your answer up to the nearest wholedollar.)

Stewart must now achieve sales of

to maintain the same level of profit.

Requirement 2. If monthly sales are $1,050,000, by how much will he need to cut fixed costs to maintain his prior profit level of $95,000 permonth?

Fixed expenses can only be

in order to maintain the prior profit level of $95,000 per month. Therefore, Stewart

will have to save at least

per month in fixed costs by moving operations overseas if he plans to maintain his

prior profit level.