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Stan Todd, Inc. wants to manufacture a new cell phone that can be worn on the wrist. Information from doing market research shows that he can sell this phone for $25 each. His fixed costs would be $145,000 a year and variable costs would amount to $10 per phone. (1) What would the contribution margin ratio be? (2) What sales volume in units would Stan need to break-even? (3) What sales volume in units would Stan need to earn $200,000 profit? (4) What would be the margin of safety if he sold 25,000 units (use the information calculated in #2)? 6. Diana Company, a sole proprietorship, sells only one product. The regular price is $160. Variable costs are 55% of this selling price, and fixed costs are $8,400 a month. Management decides to decrease the selling price from $160 to $145 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision. (a) At the original selling price of $160 a unit, what is the contribution margin ratio? % (b) At the original selling price of $160 a unit, what dollar volume of sales per month is required for Diana Company to break-even? (Round your answer to the nearest whole dollar) Stan Todd, Inc. wants to manufacture a new cell phone that can be worn on the wrist. Information from doing market research shows that he can sell this phone for $25 each. His fixed costs would be $145,000 a year and variable costs would amount to $10 per phone. (1) What would the contribution margin ratio be? (2) What sales volume in units would Stan need to break-even? (3) What sales volume in units would Stan need to earn $200,000 profit? (4) What would be the margin of safety if he sold 25,000 units (use the information calculated in #2)? 6. Diana Company, a sole proprietorship, sells only one product. The regular price is $160. Variable costs are 55% of this selling price, and fixed costs are $8,400 a month. Management decides to decrease the selling price from $160 to $145 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision. (a) At the original selling price of $160 a unit, what is the contribution margin ratio? % (b) At the original selling price of $160 a unit, what dollar volume of sales per month is required for Diana Company to break-even? (Round your answer to the nearest whole dollar)
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Answer rating: 100% (QA)
1 The contribution margin ratio can be calculated using the formula Contribution Margin Ratio Selling Price Variable Costs Selling Price In this case ... View the full answer
Related Book For
Managerial Economics
ISBN: 978-0133020267
7th edition
Authors: Paul Keat, Philip K Young, Steve Erfle
Posted Date:
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