James Manufacturing wants to estimate its breakeven revenue and level of profitability at different ranges of sales revenue. It provides you with the following table:

REQUIRED:

a. Calculate the contribution margin ratio.

b. What is James Manufacturing’s breakeven point in revenue dollars?

c. If the company wants to increase its profits to $100,000 before tax, what revenue will it need to make?

d. The company has been approached by a salesman from a national distributor of office products that says he can reduce James Manufacturing’s variable costs by 10% if the company buys a machine that costs $10,000. Should the company buy this machine? Why or why not? Develop a brief business case to explain your conclusions.

Transcribed Image Text:

James Manufacturing Revenue $300,000 Less: Variable Costs 180,000 Total Contribution Margin 120,000 Less: Fixed Costs 60,000 Profit Margin before Tax 60,000