Grover's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of...

 

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Grover's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $670,000 and a contribution margin of 95% of revenues. Grover 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. Grover's contribution margin has shrunk to 75% of revenues. Grover's monthly operating income, prior to these pressures, was $280,000. Read the requirements. Requirement 1. To maintain this same level of profit, what sales volume (in sales revenue) must Grover now achieve? Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach. ( Operating income )/ Contribution margin ratio = Target sales dollars Fixed expenses (Round your answer up to the nearest Grover must now achieve sales of $ + Requirement 2. If monthly sales are Fixed expenses can only be $ will have to save at least $ prior profit level, whole dollar.) 1,266,667 to maintain the same level of profit. $1,000,000, by how much will he need to cut fixed costs to maintain his prior profit level in order to maintain the prior profit level of $280,000 per month. Therefore, Grover per month in fixed costs by moving operations overseas if he plans to maintain his $280,000 per month? Grover's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $670,000 and a contribution margin of 95% of revenues. Grover 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. Grover's contribution margin has shrunk to 75% of revenues. Grover's monthly operating income, prior to these pressures, was $280,000. Read the requirements. Requirement 1. To maintain this same level of profit, what sales volume (in sales revenue) must Grover now achieve? Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach. ( Operating income )/ Contribution margin ratio = Target sales dollars Fixed expenses (Round your answer up to the nearest Grover must now achieve sales of $ + Requirement 2. If monthly sales are Fixed expenses can only be $ will have to save at least $ prior profit level, whole dollar.) 1,266,667 to maintain the same level of profit. $1,000,000, by how much will he need to cut fixed costs to maintain his prior profit level in order to maintain the prior profit level of $280,000 per month. Therefore, Grover per month in fixed costs by moving operations overseas if he plans to maintain his $280,000 per month?

Answer rating: 100% (QA)

Requirement 1 New sales to acheive same operating income as before 2... View the full answer