The PowerClean Company manufactures an engine for carpet cleaners called the Snooper. Budgeted cost and revenue...
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The PowerClean Company manufactures an engine for carpet cleaners called the "Snooper." Budgeted cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units. Sales revenue $1,600,000 Less: Cost of goods sold 1,120,000 Gross margin $480,000 Less: Operating expenses 100,000 Income $380,000 Cost of goods sold consists of $810,000 of variable costs and $310,000 of fixed costs. Operating expenses consist of $30,000 of variable costs and $70,000 of fixed costs. Required: A. Calculate the contribution margin and the contribution margin ratio. B. Calculate the break-even point in units and sales dollars. C. Calculate the safety margin (in dollars). D. Calculate the degree of operating leverage, and use it to calculate the percent increase in income that would result from a 20% increase in sales. E. PowerClean received an order for 6,000 units at a price of $25.00. There will be no increase in fixed costs, but variable costs will be reduced by $0.54 per unit because of cheaper packaging. Determine the projected increase or decrease in profit from the order, assuming there are no opportunity costs. The PowerClean Company manufactures an engine for carpet cleaners called the "Snooper." Budgeted cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units. Sales revenue $1,600,000 Less: Cost of goods sold 1,120,000 Gross margin $480,000 Less: Operating expenses 100,000 Income $380,000 Cost of goods sold consists of $810,000 of variable costs and $310,000 of fixed costs. Operating expenses consist of $30,000 of variable costs and $70,000 of fixed costs. Required: A. Calculate the contribution margin and the contribution margin ratio. B. Calculate the break-even point in units and sales dollars. C. Calculate the safety margin (in dollars). D. Calculate the degree of operating leverage, and use it to calculate the percent increase in income that would result from a 20% increase in sales. E. PowerClean received an order for 6,000 units at a price of $25.00. There will be no increase in fixed costs, but variable costs will be reduced by $0.54 per unit because of cheaper packaging. Determine the projected increase or decrease in profit from the order, assuming there are no opportunity costs.
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Related Book For
Cost Management Accounting and Control
ISBN: 978-0324559675
6th Edition
Authors: Don R. Hansen, Maryanne M. Mowen, Liming Guan
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