Question: PROBLEM 4-11. Multiproduct, Contribution Margin Ratio RealTimeService offers computer consulting, training, and repair services. For the most recent fiscal year, profit was $230,000 as follows:
PROBLEM 4-11. Multiproduct, Contribution Margin Ratio RealTimeService offers computer consulting, training, and repair services. For the most recent fiscal year, profit was $230,000 as follows:
Consulting Training Repair Total Sales $500,000 $400,000 $300,000 $1,200,000 Less variable costs:
Salaries 250,000 160,000 180,000 590,000 Supplies/parts 20,000 30,000 60,000 110,000 Other 1,000 2,000 4,000 7,000 Contribution margin 229,000 208,000 56,000 493,000 Less common fixed costs:
Rent 40,000 Owner's salary 200,000 Utilities 15,000 Other 8,000 Profit $ 230,000 Required
a. Jon Cisco, the owner of RealTimeService, believes that in the coming year he can increase sales by 20 percent. Assuming the current mix of services, what will be the percentage increase in profit associated with a 20 percent increase in sales? Why will profit increase at a greater percent than sales?
b. If Jon were to focus on the contribution margin per unit (rather than the contribution margin ratio), what would be a likely unit of service?
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