Refer to Williams Steel Parts in E7- 44B. William feels like hes in a giant squeeze play:

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Refer to William’s Steel Parts in E7- 44B. William feels like he’s in a giant squeeze play: The automotive manufacturers are demanding lower prices, and the steel producers have in-creased raw material costs. William’s contribution margin has shrunk to 50% of revenues. William’s monthly operating income, prior to these pressures, was $ 196,000.

Requirements
1. To maintain this same level of profit, what sales volume (in sales revenue) must William now achieve?
2. William believes that his monthly sales revenue will only go as high as $ 1,020,000. He is thinking about moving operations overseas to cut fixed costs. If monthly sales are $ 1,020,000, by how much will he need to cut fixed costs to maintain his prior profit level of $ 196,000 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...
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Managerial Accounting

ISBN: 978-0133428377

4th edition

Authors: Karen W. Braun, Wendy M. Tietz

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