Refer to Robert's Steel Parts in E7-25A. Robert feels like he's in a giant squeeze play: The

Question:

Refer to Robert's Steel Parts in E7-25A. Robert feels like he's in a giant squeeze play: The automotive manufacturers are demanding lower prices, and the steel producers have increased raw material costs. Robert's has shrunk to 60% of revenues. The company's monthly operating income, prior to these pressures, was $216,000.
Requirements
1. To maintain this same level of profit, what sales volume (in sales revenue) must Robert now achieve?
2. Robert believes that his monthly sales revenue will go only as high as $1,040,000. He is thinking about moving operations overseas to cut fixed costs. If monthly sales are $1,040,000, by how much will he need to cut fixed costs to maintain his prior profit level of $216,000 per month?
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...