Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 18 Aug 2017 My Price 14.00

Hebrides Inc.

Hebrides Inc. produces memory enhancement kits for fax machines. Sales have been very erratic, with some months showing a profit and some months showing a loss. The companyAc€?cs contribution-format income statement for the most recent month is given below:

 
  Sales (30,500 units at $20 per unit) $ 610,000  
  Variable expenses   427,000  
       
  Contribution margin   183,000  
  Fixed expenses   193,200  
       
  Operating loss $ (10,200 )
       
 
Required:
1.

Compute the companyAc€?cs CM ratio and its break-even point in both units and dollars. (Omit the "%" & "$" signs in your response.)
 
  CM ratio %
  Break-even point in units       
  Break-even point in dollars $       
 
2.

The sales manager feels that an $12,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $112,000 increase in monthly sales. If the sales manager is right, what will be the effect on the companyAc€?cs monthly operating income or loss? (Use the incremental approach in preparing your answer.) (Omit the "$" sign in your response.)
 
  Incremental contribution margin $   
  Less increased fixed costs:
    Increased advertising cost		   
   
  (Click to select)DecreaseIncrease in monthly operating income $   
   
 
3.

Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $94,000 in the monthly advertising budget, will cause unit sales to double. What will the new contribution-format income statement look like if these changes are adopted? (Input all amounts as positive values. Omit the "$" sign in your response.)
 
  (Click to select)Contribution marginVariable expensesFixed expensesSalesCost of goods sold $   
  (Click to select)Contribution marginVariable expensesCost of goods soldFixed expensesSales   
   
  (Click to select)Contribution marginFixed expensesCost of goods soldSalesVariable expenses   
  (Click to select)SalesFixed expensesVariable expensesCost of goods soldContribution margin   
   
  (Click to select)Operating incomeOperating loss $   
   
 

  

4. Refer to the original data. The companyAc€?cs advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $0.60 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $3,900?

  

  Sales units
5.

Refer to the original data. By automating certain operations, the company could slash its variable expenses in half. However, fixed costs would increase by $137,000 per month.
a.

Compute the new CM ratio and the new break-even point in both units and dollars. (Round your answers to 1 decimal place. Omit the "%" & "$" signs in your response.)
   
  CM ratio %
  Break-even point in units       
  Break-even point in dollars $       
 
b.

Assume that the company expects to sell 37,000 units next month. Prepare two contribution-format income statements, one assuming that operations are not automated and one assuming that they are.(Round your percentage answers to 1 decimal place and other answers to the nearest dollar amount. Omit the "%" & "$" signs in your response.)
  Not Automated   Automated
       
  Total Per Unit %   Total Per Unit %
  (Click to select)Fixed expensesCost of goods soldVariable expensesContribution marginSales $    $        $    $      
  (Click to select)Fixed expensesContribution marginVariable expensesCost of goods soldSales                   
               
  (Click to select)Contribution marginVariable expensesSalesCost of goods soldFixed expenses    $           $      
  (Click to select)Cost of goods soldFixed expensesVariable expensesSalesContribution margin                
               
  (Click to select)Operating lossOperating income $          $   

 

Answers

Maurice Tutor
(5)
Status NEW Posted 18 Aug 2017 04:08 PM My Price 14.00

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