The Contribution Margin at the Breakeven Point
Not what you're looking for?
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.)
__________________________________________________
b. Compute the company's contribution margin for this year.
__________________________________________________
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?
________________________________
b. What is the contribution margin ratio for the product?
________________________________
c. If total sales increase by $20,000 and fixed expenses remain unchanged, by how much would net operating income be expected to increase?
________________________________
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?
Purchase this Solution
Solution Summary
This discusses the contribution margin at the break-even point
Solution Preview
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 ...
Purchase this Solution
Free BrainMass Quizzes
Lean your Process
This quiz will help you understand the basic concepts of Lean.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce