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Miller Metal Co. CVP, what-if, sales mix

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Miller Metal Co. makes a single product that sells for $32 each and has variable costs of $20.80 per unit. Fixed costs total $47,600 monthly.

a. Calculate break even in units.
b. Assume current sales are $160,000. Calculate margin of safety and margin of safety ratio.
c. Calculate operating income if 5,000 units are sold this month.
d. Calculate operating income for the month if the selling price is increased to $33 per unit, advertising expenditures are increased by $7,000 , and unit sales volume rises to 5,400 units.
e. Assume that the firm adds another product that sells for $20 per unit, has variable costs of $14 per unit, and causes fixed expenses in total to increase to $63,000 per month. Calculate the firm's operating income if 5,000 units of the original product and 4,000 units of the new product are sold each month. For the original product, use the selling price and variable cost data given in the first sentence above.
f. Calculate the firm's operating income if 4,000 units of the original product and 5,000 units of the new product are sold each month.
g. Explain why operating income is different in parts e and f, even though total sales units were both 9,000.

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Solution Summary

Strategy for solving is illustrated in excel. Click in cells to see calculations.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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