1. Butler Sales Company is a distributor that has an exclusive franchise to sell a particular product made by another company. Butler Sales Company's income statements for the last two years are given below:

This Year Last Year
Units sold 200,000 160,000

Sales revenue $1,000,000 $800,000
Less cost of goods sold 700,000 560,000
Gross margin 300,000 240,000
Less operating expenses 210,000 198,000
Net operating income $ 90,000 $ 42,000

Operating expenses are a mixture of fixed costs and variable and mixed costs that vary with respect to the number of units sold.

Required:
a. Estimate the company's variable operating expenses per unit, and its total fixed operating expenses per year. (express it as a cost formula.)

2. Baker Company has a product that sells for $20 per unit. The variable expenses are $12 per unit, and fixed expenses total $30,000 per year.

Required:
a. What is the total contribution margin at the break-even point?

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b. What is the contribution margin ratio for the product?

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c. If total sales increase by $20,000 and fixed expenses remain unchanged, by how much would net operating income be expected to increase?

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d. The marketing manager wants to increase advertising by $6,000 per year. How many additional units would have to be sold to increase overall net operating income by $2,000?

1. Butler Sales Company is a distributor that has an exclusive franchise to sell a particular product made by another company. Butler Sales Company's income statements for the last two years are given below:

This Year Last Year
Units sold 200,000 160,000

Sales revenue $1,000,000 $800,000
Less cost of goods sold 700,000 560,000
Gross margin 300,000 240,000
Less operating expenses 210,000 ...

Solution Summary

This discusses the contribution margin at the break-even point

What is thebreakevenpoint from the given below information?
fixed costs $20,000
variable costs 33% of sales
avg selling price is $10,000
a) As % of sales, what is its variable or contributionmargin?
b) If the average sale is $10,000 what is thecontributionmargin/vehicle?
c

Farrell Company manufactures a product that sells for $50 per unit. Farrell incurs a variable cost per unit of $30 and $3,400,000 in total fixed costs to produce this product. They are currently selling 200,000 units.
Instructions: Complete each of the following requirements, presenting labeled supporting computations.
(a)

1. South Company sells a single product for $20 per unit. If variable expenses are 60% of sales and fixed expenses total $9,600, the break-even point will be:
A. $24,000
B. $14,400
C. $9,600
D. $16,000
2. Arthur Company has a margin of safety percentage of 25%. The break-even point is $300,000 and the variable expenses

1.Explain the components of cost-volume-profit analysis.
2.What does each of the components mean?
3.What happens to contributionmargin per unit when unit selling prices increase? Illustrate your explanation with an example from a fictitious company of how an increase in unit selling prices might affect contributionmargin.
4

Steve Stiff & Company management provides the following data for the year 2005 planning:
Sales (1,500 units).............$ 25.00 per unit
Variable Cost ...................10.00 per unit
Fixed Costs ....................$ 15,000
Tax Rate ........................40%
Desired Profit .................$60,000
Determin

The Ronowski Company has three product lines of belts- A, B, and C with contributionmargins of $3, $2, and $1, respectively. The president foresees sales of 200,000 units in the coming period, consisting of 20,000 units of A, 100,000 units of B, and 80,000 units of C. The company's fixed costs for the period are $255,000.
1

Baldwin's product Buzz has material costs that are rising from $6.82 to $7.82. Assume that period costs and other labor costs remain unchanged. If Baldwin decides to absorb the cost and not pass any on to its customers in the form of raised prices how many units of product Buzz would need to be sold next round to break even on t

Andre has asked you to evaluate his business, Andre's Hair Styling. Andre has five barbers working for him. (Andre is not one of them.) Each barber is paid $9.90 per hour and works a 40-hour week and a 50-week year, regardless of the number of haircuts. Rent and other fixed expenses are $1,750 per month. Assume that the only