The company is considering a purchase of equipment that would reduce its direct labor costs by...

 

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The company is considering a purchase of equipment that would reduce its direct labor costs by $110,000 and would change its manufacturing overhead costs to 30% variable and 70% fixed (assume total manufacturing overhead cost is $343,000, as above). It is also considering switching to a pure commission basis for its sales staff. This would change selling expenses to 90% variable and 10% fixed (assume total selling expense is $250,000, as above). Compute (1) the contribution margin and (2) the contribution margin ratio, and recompute (3) the break-even point in sales dollars. (Round contribution margin ratio to 2 decimal places, e.g. 25.25 and all other answers to 0 decimal places, e.g. 2,520. Use the current year numbers for calculations.) 1. Contribution margin %24 2. Contribution margin ratio 3. Break-even point 24 The company is considering a purchase of equipment that would reduce its direct labor costs by $110,000 and would change its manufacturing overhead costs to 30% variable and 70% fixed (assume total manufacturing overhead cost is $343,000, as above). It is also considering switching to a pure commission basis for its sales staff. This would change selling expenses to 90% variable and 10% fixed (assume total selling expense is $250,000, as above). Compute (1) the contribution margin and (2) the contribution margin ratio, and recompute (3) the break-even point in sales dollars. (Round contribution margin ratio to 2 decimal places, e.g. 25.25 and all other answers to 0 decimal places, e.g. 2,520. Use the current year numbers for calculations.) 1. Contribution margin %24 2. Contribution margin ratio 3. Break-even point 24

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