The company produced and sold 10,000 units small wooden tools. Its operating results for last year were as follows:

Sales

400,000

Variable Expenses

160,000

Contribution Margin

240.000

Fixed Expenses

180,000

Net Profit

60,000

Required:

Answer each question independendy based on the original data:

1.Determine the break-even point in dollar sales.

2.Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms.

3.How many units must be sold each to attain a target profit of RM80,000.

4.If this year's sales commissions increase RM1 per unit and fixed expenses will decrease RM 50,0000.

a)Compute the break-even point in dollar sales.

b)Computer the new net income {P repare the contribution margin income statement)

c)How many units must be sold each D aaain a target profit of RM78,000?

PROBLEM 5-23: CVP Applications; Contribution Margin Ratio

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for RM20 per unit. Variable expenses are RM8 per unit, and fixed expenses total RM180,000 per year. Its operating results for last year were as follows:

Sales

400.000

Variable Expenses

160.000

Contribution Margin

240.000

Fixed Expenses

180.000

Net Profit

60.000

Required:

Answer each question independently based on the original data:

1.What is the product's CM ratio?

2.Determine the break-even point in dollar sales.

3.If this year's sales increase by RM75,000 and fixed expenses do not change, how much will net operating income increase?

4.Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms.

5.How many units must be sold each to attain a target profit of RM80,OOO.