Duke University Operations And Supply Chain Management Assignment Help - Variable expenses

Question - Memofax, Inc., produces memory enhancement kits for fax machines. Sales have been very erratic,
with some months showing a profit and some months showing a loss. The company's contribution
format income statement for the most recent month is given below:
Sales (13,300 units at $20 per unit) $ 266,000
Variable expenses 159,600
Contribution margin 106,400
Fixed expenses 118,400
Net operating loss $ (12,000)





Required:
1. Compute the company's CM ratio and its break-even point in both units and dollars.
CM ratio 40 %
Break-even point in units 14800
Break-even point in dollars $ 296000
2.
The sales manager feels that an $7,700 increase in the monthly advertising budget, combined
with an intensified effort by the sales ...Read More staff, will result in a $71,000 increase in monthly sales. If the
sales manager is right, what will be the effect on the company's monthly net operating income or
loss? (Use the incremental approach in preparing your answer.) (Input the amount as a positive
value.)
(Click to select)Increase in net operating incomeIncrease in net operating lossDecrease in net
operating lossDecrease in net operating income $
3.
Refer to the original data. The president is convinced that a 10% reduction in the selling price,
combined with an increase of $39,000 in the monthly advertising budget, will double unit sales.
What will the new contribution format income statement look like if these changes are
adopted? (Input all amounts as positive values except losses which should be indicated by
minus sign. )
Contribution Income Statement
(Click to select)Net operating income (loss)Contribution marginFixed expensesVariable
expensesSales $
(Click to select)Contribution marginFixed expensesNet operating income (loss)SalesVariable
expenses

(Click to select)SalesNet operating income (loss)Fixed expensesVariable expensesContribution
margin
(Click to select)Contribution marginFixed expensesVariable expensesNet operating income
(loss)Sales
(Click to select)Variable expensesSalesContribution marginFixed expensesNet operating income
(loss) $



4.
Refer to the original data. The company's advertising agency thinks that a new package would
help sales. The new package being proposed would increase packaging costs by $0.60 per unit.
Assuming no other changes, how many units would have to be sold each month to earn a profit of
$4,500? (Round your intermediate calculations to 2 decimal places and final answer to the
nearest whole number.)
Sales units

5. Refer to the original data. By automating, the company could slash its variable expenses in half.
However, fixed costs would increase by $116,000 per month.
a. Compute the new CM ratio and the new break-even point in both units and dollars. (Do not round
intermediate calculations. Round your final answers to the nearest whole number.)
CM ratio %
Break-even point in units
Break-even point in dollars $
b.
Assume that the company expects to sell 20,200 units next month. Prepare two contribution
format income statements, one assuming that operations are not automated and one assuming
that they are. (Input all amounts as positive values.)
Not Automated Automated
Total Per
Unit % Total Per
Unit %
(Click to select)Fixed expensesSalesContribution marginVariable
expensesNet operating income (loss) $ $ $ $
(Click to select)Variable expensesNet operating income
(loss)Contribution marginFixed expensesSales
(Click to select)SalesFixed expensesContribution marginNet $ $

operating income (loss)Variable expenses
(Click to select)Net operating income (loss)Variable
expensesFixed expensesSalesContribution margin








(Click to select)SalesNet operating income (loss)Fixed
expensesContribution marginVariable expenses ...Read Less

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