Assignment - In progress Complete the form, then choose the appropriate button a
ID: 2363938 • Letter: A
Question
Assignment - In progressComplete the form, then choose the appropriate button at the bottom.
Title Assignment #3
Due Oct 2, 2011 12:00 pm
Other formulas needed outside of reading material:
Sales = Variable expenses + Fixed expenses +Profit
Sales = Quantity * Units
Profit = (Sales × CM ratio) – Fixed Cost
Review Problems: Contribution margin and ratio
Problem 1: (10 points)
Sales per unit = $250
Variable Cost per unit = $150
Units = 350
a) Calculate Contribution Margin Per Unit (2 points)
b) Calculate Contribution Margin (CM) Ratio Per Unit (3 points)
c) Calculate Total Contribution Margin (CM) Dollars (5 points)
Problem 2: (5 points)
Sales = $5,000,000
CM Ratio = 0.40
Fixed cost = $1,600,000
Calculate Profit.
Problem 3: (5 points)
A company has budgeted sales of $200,000, a profit of $60,000 and fixed expenses of $40,000.
Calculate contribution margin ratio.
Review Problem: Break-even point
Problem 4: (15 points)
Voltar Company manufactures and sells a telephone answering machine. The company's contribution format income statement for the most recent year is given below:
Total
Per unit
Pct. of sales (Ratios)
Sales
$1,200,000
$60
100%
Less variable expenses
900,000
45
?%
--------
--------
--------
Contribution margin
300,000
15
?%
Less fixed expenses
240,000
======
======
--------
Net operating income
$60,000
======
a) What is the Contribution Margin (CM) Ratio (or percent of sales)? (5 points)
b) Calculate break-even point both in total units and total sales dollars. (10 points)
Problem 5: (15 points)
Management is anxious to improve the company's profit performance. Assume that next year management wants the company to earn a minimum profit of $90,000.
How many units will have to be sold to meet the target profit figure?
Explanation / Answer
I'll give you formulas and hints and let you plug in the numbers yourself.
Problem 1: (10 points)
Sales per unit = $250
Variable Cost per unit = $150
Units = 350
a) Calculate Contribution Margin Per Unit (2 points)
Answer: CM Per Unit = Sales Per Unit - Variable Cost Per Unit = ?
b) Calculate Contribution Margin (CM) Ratio Per Unit (3 points)
Answer: CM Per Unit/Sales Per Unit = ?
c) Calculate Total Contribution Margin (CM) Dollars (5 points)
Answer: Total CM $ = CM Per Unit x # of Units = ?
Problem 2: (5 points)
Sales = $5,000,000
CM Ratio = 0.40
Fixed cost = $1,600,000
Calculate Profit.
Simply use the formula you already provided:
Profit = (Sales × CM ratio) – Fixed Cost
The numbers are already provided, so all you have to do is plug them in.
Problem 3: (5 points)
A company has budgeted sales of $200,000, a profit of $60,000 and fixed expenses of $40,000.
Calculate contribution margin ratio.
Remember, CM = Sales - Variable expenses
First, using algebra, solve for Variable expenses:
1. Sales = Variable expenses + Fixed expenses +Profit
2. $200,000 = Variable expenses + $40,000 + $60,000
3. $200,000 = Variable expenses + $100,000
4. $100,000 = Variable expenses
CM Ratio = CM/Sales = (Sales - Variable expenses)/Sales
Plug in the above numbers to solve.
Problems 4 & 5: Apparently, these two problems go together. The formatting of the original problem did not transfer well when copied and pasted the problem into Cramster. I can't exactly read the problem data as it currently stands, and I am afraid that I will make an error if I try to. If you would fix the formatting and repost it, I'll be glad to help. Thanks.