Silverstone is a company that manufactures and sells electrical engines for electrical trucks. For its 2023...

 

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Silverstone is a company that manufactures and sells electrical engines for electrical trucks. For its 2023 budget, Silverstone estimates that unit selling price is $10,000, variable manufacturing cost per engine is $5,000. Fixed costs are $600,000 per month. Sales team incurs a flat salary of $8,000 per month, which is already included in monthly fixed cost budget. On top of that, the sales commission is 5% of selling price. Required: a. What is the contribution margin per engine? (2 marks) b. What is the breakeven point in units and in revenues each month? (Show your calculation steps). (5 marks) c. At current price level, Silverstone expects to sell 140 units of its engine. If Silverstone lowers the price by 10%, the marketing team predicts that the sales will increase to 170 units. Is it a good decision? Using the result to illustrate why. (9 marks) d. What is the operating leverage level if Silverstone sells 150 units per month at current price? (4 marks) Silverstone is a company that manufactures and sells electrical engines for electrical trucks. For its 2023 budget, Silverstone estimates that unit selling price is $10,000, variable manufacturing cost per engine is $5,000. Fixed costs are $600,000 per month. Sales team incurs a flat salary of $8,000 per month, which is already included in monthly fixed cost budget. On top of that, the sales commission is 5% of selling price. Required: a. What is the contribution margin per engine? (2 marks) b. What is the breakeven point in units and in revenues each month? (Show your calculation steps). (5 marks) c. At current price level, Silverstone expects to sell 140 units of its engine. If Silverstone lowers the price by 10%, the marketing team predicts that the sales will increase to 170 units. Is it a good decision? Using the result to illustrate why. (9 marks) d. What is the operating leverage level if Silverstone sells 150 units per month at current price? (4 marks)

Answer rating: 100% (QA)

a The contribution margin per engine is the selling price per unit minus the variable manufacturing cost per unit Thus the contribution margin per eng... View the full answer