Sally Company sells 40,000 units at $11 per unit. Variable costs are $8.25 per unit, and fixed costs are $48,400.
Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) operating income.
a. Contribution margin ratio (Enter as a whole number.)
fill in the blank 1
b. Unit contribution margin (Round to the nearest cent.) $fill in the blank 2 per unit
c. Operating income $fill in the blank 3
Break-Even Sales Under Present and Proposed Conditions
Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is as follows:
Cost of goods sold (99,000,000)
Gross profit $87,000,000
Selling expenses $15,000,000
Administrative expenses 10,900,000
Total expenses (25,900,000)
Operating income $61,100,000
The division of costs between variable and fixed is as follows:
Cost of goods sold 70% 30%
Selling expenses 75% 25%
Administrative expenses 50% 50%
Management is considering a plant expansion program for the following year that will permit an increase of $11,160,000 in yearly sales. The expansion will increase fixed costs by $4,500,000 but will not affect the relationship between sales and variable costs.
1. Determine the total variable costs and the total fixed costs for the current year.
Total variable costs $fill in the blank 1
Total fixed costs $fill in the blank 2
2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.
Unit variable cost $fill in the blank 3
Unit contribution margin $fill in the blank 4
3. Compute the break-even sales (units) for the current year.
fill in the blank 5 units
4. Compute the break-even sales (units) under the proposed program for the following year.
fill in the blank 6 units
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $61,100,000 of operating income that was earned in the current year.
fill in the blank 7 units
6. Determine the maximum operating income possible with the expanded plant.
$fill in the blank 8
7. If the proposal is accepted and sales remain at the current level, what will the operating income or loss be for the following year?
$fill in the blank 9
Sheridan Inc. sells a product for $67 per unit. The variable cost is $34 per unit, while fixed costs are $331,056.
Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $72 per unit.
a. Break-even point in sales units
fill in the blank 1 units
b. Break-even point if the selling price were increased to $72 per unit
fill in the blank 2 units