Ullie Medical Supply is a retailer of home medical equipment. Last year, Ullies sales reve-nues totaled $

Question:

Ullie Medical Supply is a retailer of home medical equipment. Last year, Ullie’s sales reve-nues totaled $ 6,800,000. Total expenses were $ 2,600,000. Of this amount, approximately $ 1,088,000 were variable, while the remainder were fixed. Since Ullie’s offers thousands of different products, its managers prefer to calculate the breakeven point in terms of sales dollars rather than units.

Requirements
1. What is Ullie’s current operating income?
2. What is Ullie’s ratio?
3. What is the company’s breakeven point in sales dollars?
4. Ullie’s top management is deciding whether to embark on a $ 250,000 advertising campaign. The marketing firm has projected annual sales volume to increase by 14% as a result of this campaign. Assuming that the projections are correct, what effect would this advertising campaign have on the company’s annual operating income?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...