Managerment

WEEK 2 ASSIGNMENTS

DAN TRAN

3-1

Requirement1:

The sales volume increases by 50 units.

Original net operating income $8,000

Change in contribution margin

(50 units × $8.00 per unit) = 400 ( New net operating income $8,400

The new income statement would be:

Total Per Unit

Sales (8,050 units) $209,300 $26.00

Variable expenses 144,900 18.00

Contribution margin 64,400 $8.00

Fixed expenses 56,000

Net operating income $8,400

Requirement 2:

The sales volume declines by 50 units.

Original net operating income $8,000

Change in contribution margin

(-50 units × $8.00 per unit) (400) ( New net operating income $7,600

The new income statement would be:

Total Per Unit

Sales (7,950 units) $206,700 $26.00

Variable expenses 143,100 18.00

Contribution margin 63,600 $8.00

Fixed expenses 56,000

Net operating income $7,600

Requirement 3:

The sales volume is 7,000 units

The new income statement would be:

Total Per Unit

Sales (7,000 units) $182,000 $26.00

Variable expenses 126,000 18.00

Contribution margin 56,000 $ 8.00

Fixed expenses 56,000

Net operating income $0

➢ This is the company's break-even point.

3-4

Requirement1:

Contribution Margin Ratio = Contribution Margin/ Sales = (Sales - Variable Expenses)/ sale = ($300,000 - $240,000)/ $300,000 = 20%

Requirement2:

$1,500X 20% = $300 is the change in net operating income from an increase in total sales of $1,500

3-6

Liman Corporation has a single product whose selling price is $140 and whose variable expense is $60 per unit. The company's monthly fixed expense is...