Waterways Problem 05 The Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to meet sales demand in the coming year. He is also trying to determine how the company's profits might be increased in the coming year. This problem asks you to use cost-volume-profit concepts to help Waterways understand contribution margins of some of its products and decide whether to mass-produce any of them. Waterways markets a simple water control and timer that it mass-produces. Last year, the company sold 727,000 units at an average selling price of $4.90 per unit. The variable costs were $2,137,380, and the fiuced costs were $997,444. your answer is correct. What is the product's contribution margin ratio? (Round ratio to 0 decimal places, e.g. 25%.) Contribution margin ratio 40% SHOW SOLUTION LINK TO TEXT LINK TO TEXT LINK TO TEXT your answer is correct. What is the company's break-even point in units and in dollars for this product? Break-even point in units 508900 units Break-even point in dollars 2493610 Your answer is correct. What is the company's break-even point in units and in dollars for this product? Break-even point in units 508900 funits Break-even point in dollars 2493610 SHOW SOLUTION LINK TO TEXT LINK TO TEXT LINK TO TEXT Your answer is correct. What is the margin of safety, both in dollars and as a ratio? (Round ratio to o decimal places, e.g. 25%.) Margin of safety in dollars 1068690 Margin of safety ratio 30% SHOW SOLUTION Your answer is correct. If management wanted to increase its income from this product by 10%, how many additional units would have to be sold to reach this income level? Waterways would have to sell an additional 21810 units SHOW SOLUTION LINK TO TEXT LINK TO TEXT LINK TO TEXT Your answer is correct. If sales increase by 54,000 units and the cost behaviors do not change, how much will income increase on this product? Income will increase by 105840 SHOW SOLUTION LINK TO TEXT LINK TO TEXT LINK TO TEXT Your answer is partially correct. Try again. Waterways is thinking of mass-producing one of its special-order sprinklers. To do so would increase variable costs for all sprinklers by an average of $0.80 per unit. The company also estimates that this change could increase the overall number of sprinklers sold by 10%, and the average sales price would increase $0.20 per unit. Waterways currently sells 485,000 sprinkler units at an average selling price of $27.20. The manufacturing costs are $7,211,860 variable and $1,837,756 fixed. Selling and administrative costs are $2,682,140 variable and $790,290 fixed. If Waterways begins mass-producing its special-order sprinklers, how would this affect the company? (Round ratio to 0 decimal places, e.g. 5% and Net income to o decimal places, e.g. 2,520.) Current New Effect Contribution margin ratio 2011% Decrease by 511 % x Net income 66995400 25285400 Increase by 417100 LINK TO TEXT LINK TO TEXT LINK TO TEXT Your answer is partially correct. Try again. Waterways is thinking of mass-producing one of its special-order sprinklers. To do so would increase variable costs for all sprinklers by an average of $0.80 per unit. The company also estimates that this change could increase the overall number of sprinklers sold by 10%, and the average sales price would increase $0.20 per unit. Waterways currently sells 485,000 sprinkler units at an average selling price of $27.20. The manufacturing costs are $7,211,860 variable and $1,837,756 fixed. Selling and administrative costs are $2,682,140 variable and $790,290 fixed. Current New Effect X Contribution margin ratio 25% 20 % Decrease by 5 || % x X Net income 66995400 25285400 Increase by 417100 LINK TO TEXT LINK TO TEXT LINK TO TEXT Your answer is partially correct. Try again. Waterways is thinking of mass-producing one of its special-order sprinklers. To do so would increase variable costs for all sprinklers by an average of $0.80 per unit. The company also estimates that this change could increase the overall number of sprinklers sold by 10%, and the average sales price would increase $0.20 per unit. Waterways currently sells 485,000 sprinkler units at an average selling price of $27.20. The manufacturing costs are $7,211,860 variable and $1,837,756 fixed. Selling and administrative costs are $2,682,140 variable and $790,290 fixed. If the average sales price per sprinkler unit did not increase when the company began mass-producing the special-order sprinkler, what would be the effect on the company? (Round answers to o decimal places, e.g. 5% or 2,520.) Contribution margin ratio Decrease by % x Profit Decrease by 523800