Question
Wesley Company manufactures and sells a single product. The companys sales and expenses for last quarter follow: Total Per Unit Sales $ 750,000 $ 30
| Wesley Company manufactures and sells a single product. The companys sales and expenses for last quarter follow: |
| Total | Per Unit | |||||
| Sales | $ | 750,000 | $ | 30 | ||
| Less: Variable expenses | 525,000 | 21 | ||||
| Contribution margin | 225,000 | $ | 9 | |||
| Less: Fixed expenses | 180,000 | |||||
| Net operating income | $ | 45,000 | ||||
| Required: |
| 1. | What is the quarterly break-even point in units sold and in sales dollars? |
| 2. | Without resorting to computations, calculate the total contribution margin at the break-even point. |
| 3. | How many units would have to be sold each quarter to earn a target profit of $36,900? Use the formula method. |
| 4. | Refer to the original data. Compute the companys margin of safety for the quarter in both dollar and percentage terms. (Round "Percentage" answer to 1 decimal place, (i.e., 0.123 should be considered as 12.3%).) |
| 5. | What is the companys CM ratio? If quarterly sales increase by $22,500 and there is no change in fixed expenses, by how much would you expect quarterly net operating income to increase? (Do not prepare an income statement; use the CM ratio to compute your answer.) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started