Marks Co. sells a single product and has the following most recent income statem
ID: 2398339 • Letter: M
Question
Marks Co. sells a single product and has the following most recent income statement:
Sales (2000 units)$70,000
Variable Expenses$36,000
Contribution Margin$34,000
Less Fixed Costs$22,000
Net Income$12,000
Provide answers for the following:
A. Contribution margin per unit
B. If sales are doubled to $140,000, total variable costs will be what?
C.If sales are doubled to $140,000, total fixed costs will equal what?
D. If 50 more units are sold, profits will increase by what amount?
E. Compute how many units must be sold to breakeven.
F. Compute how many units must be sold to earn net income of $24,000.
Explanation / Answer
A)Contribution margin per unit =COntribution margin /number of units
= 34000/2000
= $ 17 per unit
B)Variable cost ratio =variable cost /sales
= 36000/70000
= .5143 or 51.43%
Variable cost =sales * variable cost ratio
= 140000*.5143
= $ 72000
c)Total fixed cost remain same irrespective of change in level of sales = $ 22000
D)
Profit will increase by =contribution per unit * units
= 17*50
= $ 850
E)BEP (units)= fixed cost /contribution per unit
= 22000/17
= 1294.12 or1295 units
F)Target units = [fixed cost+ target profit ]/contribution per unit
=[22000+24000]/17
= 46000/17
= 2705.88 or 2706 units