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 > Management Posted 20 Feb 2018 My Price 7.00

Fitzgibbons Company

Fitzgibbons Company produces plastic mailboxes. The projected income statement

 

for the coming year follows:

 

Basics of the Sales

Sales

$840,600

Revenue Approach

Less: Variable costs

  353,052

LO2, LO5

Contribution margin

$487,548

 

Less: Fixed costs

  250,000

 

Operating income

$237,548

 

 

Required

1.    Compute the contribution margin ratio for the mailboxes.

2.    How much revenue must Fitzgibbons earn in order to break even?

3.    What volume of sales must be earned if Fitzgibbons wants to earn an after-tax income equal to 8 percent of sales? Assume that the tax rate is 34 percent.

4.    What is the effect on the contribution margin ratio if the unit selling price and unit variable cost each increase by 10 percent?

5.    Suppose that management has decided to give a 3 percent commission on all sales. The projected income statement does not reflect this commission. Recom- pute the contribution margin ratio assuming that the commission will be paid. What effect does this have on the break-even point?

 

 

 

 

 

 

6.    If the commission is paid as described in Requirement 5, management expects sales revenues to increase by $80,000. Is it a sound decision to implement the commission? Support your answer with appropriate computations.

 

Answers

Maurice Tutor
(5)
Status NEW Posted 20 Feb 2018 10:02 PM My Price 7.00

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