Backus Inc. makes and sells many consumer products. The firm's average contribution margin ratio is 35%. Management
Question:
Backus Inc. makes and sells many consumer products. The firm's average contribution margin ratio is 35%. Management is considering adding a new product that will require an additional $15.000 per month of fixed expenses and will have variable expenses of $7.80 per unit.
Required:
a. Calculate the selling price that will be required for the new product if it is to have a contribution margin ratio equal to 35%.
b. Calculate the number of units of the new product that would have to be sold if the new product is to increase the firm's monthly operating income by $6.000
Contribution MarginContribution 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...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Accounting What the Numbers Mean
ISBN: 978-1259535314
11th edition
Authors: David Marshall, Wayne McManus, Daniel Viele
Question Posted: