Kirk Company’s contribution margin ratio on the sale of its most popular product is 35%. The product is priced at $75, and annual fixed expenses are $752,000. Management is evaluating two options: (1) lowering variable costs by 10% and (2) reducing fixed expenses by 10%. Required: Calculate the current level of break-even sales in dollars, as well as the break-even sales for the two options. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Kirk Company’s contribution margin ratio on the sale of its most popular product is 35%. The product is priced at $75, and annual fixed expenses are $752,000. Management is evaluating two options: (1) lowering variable costs by 10% and (2) reducing fixed expenses by 10%. Required: Calculate the current level of break-even sales in dollars, as well as the break-even sales for the two options. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?
Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Klinken Corporation's contribution margin ratio on the sale of its most popular product is 42%. The product is priced at $100, annual fixed expenses are $900,000. Management is evaluating two options: (1) lowering variable costs by 15% and (2) reducing fixed expenses by 15%. Required: Calculate the current level of break-even sales in dollars, as well as the break-even sales for the two options. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) Break-even sales in dollars Option 1: Break-even sales in dollars Option 2: Break-even sales in dollars
Klinken Corporation’s contribution margin ratio on the sale of its most popular product is 42%. The product is priced at $80, annual fixed expenses are $800,000. Management is evaluating two options: (1) lowering variable costs by 10% and (2) reducing fixed expenses by 10%. Required:Calculate the current level of break-even sales in dollars, as well as the break-even sales for the two options. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.
D&R Corp. has annual revenues of $262,000, an average contribution margin ratio of 33%, and fixed expenses of $101,800. Required: a. Management is considering adding a new product to the company's product line. The new item will have $8.7 of variable costs per unit. Calculate the selling price that will be required if this product is not to affect the average contribution margin ratio. b. If the new product adds an additional $29,100 to D&R's fixed expenses, how many units of the new product must be sold at the price calculated in part a to break even on the new product? c. If 20,900 units of the new product could be sold at a price of $14.2 per unit, and the company's other business did not change, calculate D&R's total operating income and average contribution margin ratio. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C If 20,900 units of the new product could be sold at a price of…
Management believes it can sell a new product for $6.50. The fixed costs of production are estimated to be $5,500, and the variable costs are $2.50 a unit. Complete the following table at the given levels of output and the relationships between quantity and fixed costs, quantity and variable costs, and quantity and total costs. Round your answers to the nearest dollar. Enter zero if necessary. Use a minus sign to enter losses, if any. Quantity Total Revenue Variable Costs Fixed Costs Total Costs Profits (Losses) 0 $ $ $ $ $ 500 $ $ $ $ $ 1,000 $ $ $ $ $ 1,500 $ $ $ $ $ 2,000 $ $ $ $ $ 2,500 $ $ $ $ $ 3,000 $ $ $ $ $ Determine the break-even level using the above table and use the Exhibit 19.5 to confirm the break-even level of output. Round your answers for the break-even level to the nearest whole number. Round your answers for the fixed costs, variable costs, total costs,…
Bloom Company management predicts that it will incur fixed costs of $267,000 and earn pretax income of $353,100 in the next period. Its expected contribution margin ratio is 53%. Required: 1. Compute the amount of total dollar sales. 2. Compute the amount of total variable costs. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the amount of total dollar sales. Dollar Sales Choose Numerator: / Choose Denominator: = 1 of 5 F8 Next > F9 18 F10 F11 F12 Fn Lock 3:25 PM 6/16/2022 Insert
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Reid Company is considering the production of a new product. The expected variable cost is $24 per unit. Annual fixed costs are expected to be $892,500. The anticipated sales price is $75 each. Required Determine the break-even point in units and dollars using each of the following: Use the equation method. Use the contribution margin per unit approach. Use the contribution margin ratio approach. (Do not round intermediate calculations. Round "Contribution margin ratio" to 1 decimal place. (i.e., 0.234 should be entered as 23.4))
B. C. D&R Corporation has annual revenues of $375,000, an average contribution margin ratio of 32%, and fixed expenses of $150,000. Required: a. Management is considering adding a new product to the company's product line. The new item will have $9.52 of variable costs per unit. Calculate the selling price that will be required if this product is not to affect the average contribution margin ratio. b. If the new product adds an additional $26,880 to D&R's fixed expenses, how many units of the new product must be sold at the price calculated in part a to break even on the new product? c. If 16,000 units of the new product could be sold at a price of $15.50 per unit, and the company's other business did not change, calculate D&R's total operating income and average contribution margin ratio. Complete this question by entering your answers in the tabs below. Required A Required B Management is considering adding a new product to the company's product line. The new item will have $9.52 of…
Management believes it can sell a new product for $7.50. The fixed costs of production are estimated to be $4,500, and the variable costs are $3.90 a unit. a. Complete the following table at the given levels of output and the relationships between quantity and fixed costs, quantity and variable costs, and quantity and total costs. Round your answers to the nearest dollar Enter zero if necessary. Use a minus sign to enter losses, if any Quantity Variable Costs Fixed Costs 0 500 1,000 $ $ $ S 2,500 $ 3,000 S 1,500 2,000 Total Revenue S Quantity $ $ Total Revenue $ $ $ $ $ $ $ $ $ S Fixed Costs $ $ Total Costs b. Determine the break-even level using the above table and use the Exhibit 19.5 to confirm the break even level of output. Round your answers for the break-even level to the nearest whole number. Round your answers for the fixed costs, variable costs, total costs, and profits (losses) to the nearest dollar. Enter zero if necessary Use a minus sign to enter losses, if any Variable…
Klinken Corporation's contribution margin ratio on the sale of its most popular product is 52%. The product is priced at $98, annual fixed expenses are $890,000. Management is evaluating two options: (1) lowering variable costs by 10% and (2) reducing fixed expenses by 10%. Required: Calculate the current level of break-even sales in dollars, as well as the break-even sales for the two options. (Do not round Intermedlate calculations. Round your answers to the nearest whole dollar amount.) Break-even sales in dollars Option 1: Break-even sales in dollars Option 2: Break-even sales in dollars