Varsity's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $460,000 and a contribution margin of 75% of revenues. Varsity feels like he is in a giant squeeze play: The automotive manufacturers are demanding lower prices, and the steel producers have increased raw material costs. Varsity's contribution margin has shrunk to 50% of revenues. Varsity's monthly operating income, prior to these pressures, was $310,000.

Requirements

1.	To maintain this same level of profit, what sales volume (in sales revenue) must Varsity now achieve?
2.	Varsity believes that his monthly sales revenue will go only as high as $1,160,000. He is thinking about moving operations overseas to cut fixed costs. If monthly sales are $1,160,000, by how much will he need to cut fixed costs to maintain his prior profit level of $310,000 per month?

= Test: Midterm Exam Question 2 This Test: 14 pts possible Submit Test Varsity's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $460,000 and a contribution margin of 75% of revenues. Varsity feels like he is in a giant squeeze play: The automotive manufacturers are demanding lower prices, and the steel producers have increased raw material costs. Varsity's contribution margin has shrunk to 50% of revenues. Varsity's monthly operating income, prior to these pressures, was $310,000. Requirements 1. To maintain this same level of profit, what sales volume (in sales revenue) must Varsity now achieve? 2. Varsity believes that his monthly sales revenue will go only as high as $1,160,000. He is thinking about moving operations overseas to cut fixed costs. If monthly sales are $1,160,000, by how much will he need to cut fixed costs to maintain his prior profit level of $310,000 per month? Requirement 1. To maintain this same level of profit, what sales volume (in sales revenue) must Varsity now achieve? Select the labels to complete the formula to compute the target sales revenue in dollars using the contribution margin approach. Then enter the amounts to calculate the new target sales in dollar Varsity must now achieve. (Enter ratios as decimals. Round your answer up to the nearest whale dollar.) Sales in dollars Requirement 2. If monthly sales are $1,160,000, by how much will he need to cut fixed costs to maintain his prior profit level of $310.000 per month? Fixed expenses can only be s in order to maintain the prior profit level of $310,000 per month. Therefore. Varsity will have to save at least per month in fixed costs by moving operations overseas if he plans to maintain his prior profit level. Time Remaining: 02:31:45 Next