Ratliff Corporation produces lawn fertilizer spreaders. Ratliff’s income statement shown has been prepared for August of the current year.

Instructions:

1. Prepare Ratliff’s August income statement reporting contribution margin.

2. Calculate the contribution margin rate.

3. Calculate the sales dollar breakeven point.

4. Calculate the unit sales breakeven point.

5. If a \($15,000.00\) monthly net income is planned, calculate the required

(a) sales dollars and

(b) unit sales.

6. Ratliff is considering using computer-based machines to increase the productivity of the manufacturing process. The new machines would reduce variable costs by \($4.20\) per unit but increase monthly fixed costs by \($10,000.00\). Calculate the projected net income assuming that Ratliff sells 3,000 units. Should Ratliff purchase the machines? Explain your answer.

Transcribed Image Text:

Operating Revenue: Ratliff Corporation Income Statement For Month Ended August 31, 20-- Net Sales (3,000 units @ $25.00).. Cost of Merchandise Sold (3,000 units @ $16.00). Gross Profit on Operations Operating Expenses: Selling Expenses: Sales Commission (3,000 units @ $0.60) Delivery Costs (3,000 units @ $0.75) Other Variable Costs (3,000 units @ $1.15) Other Fixed Costs $1,800.00 2,250.00 3,450.00 3,590.00 $11,090.00 Administrative Expenses: Rent Insurance $1,000.00 600.00 Other Variable Costs (3,000 units @ $0.25) 750.00 Other Fixed Costs 5,610.00 7,960.00 Total Operating Expenses Income from Operations Other Expenses.. Net Income $75,000.00 48,000.00 $27,000.00 19,050.00 $ 7,950.00 800.00 $ 7,150.00