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You are to complete this problem quiz in groups or 2 or 3. You are ONLY allowed to use your notes and calculator to complete
You are to complete this problem quiz in groups or 2 or 3. You are ONLY allowed to use your notes and calculator to complete this quiz. Each group member needs to submit a quiz with the names of all the group members and/or the packet needs to be stapled together. Voltron Co. manufactures and sells a specialized cordless telephone for high electromagnetic radiation environments. The company's contribution format income statement for the most recent year is given below. Management is anxious to increase the company's profit and has asked for an analysis of a number of items. Sales (20,000 units) Variable Expenses Contribution Margin Fixed Expenses Net Income Total $2,400,000 $1,800,000 $600,000 $480,000 $120,000 Per Unit $120 $90 $30 Percent of Sales 100% (A) (8) (A) Compute the variable cost ratio (B) Compute the contribution margin ratio (C) Compute the break-even point in both units and dollar sales. Round both units and dollars to a whole number (D) Assume that sales increase by $350,000 next year. If cost patterns remain unchanged by how much will the company's net income increase? Use the CM ratio to compute your answer. (E) Using the original data, assume that next year management wants the company to earn a profit of at least $180,000. How many units will have to be sold to achieve this target profit? (F) Using the original data, compute the company's margin of safety in both dollars and percentage. (G) Using original data, calculate the degree of operating leverage. Assume that through a more intense effort by the sales staff the company's sales increase by 9% next year. By what percentage would you expect net income to increase? (H) in an effort to increase sales and profits, management is considering use of a higher quality material in the product. This higher quality material would increase variable costs by $4.00 per unit, but management could eliminate one quality inspector who is paid a $40,000 salary. The expected increase in sales is 20%. Part 1: Assuming that changes are made as described above, prepare a projected contribution margin income statement for next year. (use the same format as that used in the given info) Part 2: Compute the company's new breakeven point in both dollars and units
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