| 1. Last month when Harrison Creations, Inc., sold 40,000 units, total sales were $300,000, total variable expenses were $240,000, and fixed expenses were $45,000. |
| Required: |
| a. |
What is the company’s contribution margin (CM) ratio? |
| b. |
Estimate the change in the company’s net operating income if it were to increase its total sales by $1,500.
2. [The following information applies to the questions displayed below.]
Maxson Products distributes a single product, a woven basket whose selling price is $8 and whose variable cost is $6 per unit. The company’s monthly fixed expense is $5,500.
| Required: |
| a. |
Compute for the company’s break-even point in unit sales using the equation method.
b.Compute for the company’s break-even point in sales dollars using the equation method and the CM ratio.(Do not round intermediate calculations.Round your CM ratio to 2 decimal places.)
CM ratio______________________
Break-even point in dollar sales________________________________ |
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| 4. Mohan Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning next month’s budget appear below: |
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| Selling price |
$25 |
per unit |
| Variable expenses |
$15 |
per unit |
| Fixed expenses |
$8,500 |
per month |
| Unit sales |
1,000 |
units per month |
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| Required: |
| a. |
Compute the company’s margin of safety. |
b. Compute the company’s margin of safety as a percentage of its sales. (%)
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