[The following information applies to the questions displayed below.] Monterey Co. makes and sells a single product. The current selling price is $15 per unit. Variable expenses are $9 per unit, and fixed expenses total $34,300 per month. (Unless otherwise stated, consider each requirement separately.)

Required:

a. Calculate the break-even point expressed in terms of total sales dollars and sales volume. (Do not round intermediate calculations.)

Break-even sales
Break-even volume		units

b. Calculate the margin of safety and the margin of safety ratio. Assume current sales are $100,750. (Do not round intermediate calculations. Round your percentage answer to 2 decimal places.)

Margin of safety
Margin of safety of ratio		%

c. Calculate the monthly operating income (or loss) at a sales volume of 5,050 units per month. (Do not round intermediate calculations.

d. Calculate monthly operating income (or loss) if a $2 per unit reduction in selling price results in a volume increase to 8,000 units per month. (Do not round intermediate calculations.)

e. What questions would have to be answered about the cost-volume-profit analysis simplifying assumptions before adopting the price cut strategy of part d? (Select all that apply.)

Does the increase in volume move fixed expenses into a new relevant range?

Does the increase in volume move variable expenses into a new relevant range?

Are variable expenses really linear?

Are fixed expenses really linear?

f. Calculate the monthly operating income (or loss) that would result from a $1 per unit price increase and a $6,000 per month increase in advertising expenses, both relative to the original data. Assume a sales volume of 5,050 units per month. (Do not round intermediate calculations.)

+

The full content of this question did not transfer to your assignment. Please try again. reload