Crane sells a learning system that helps preschool and elementary students learn basic math facts and concepts. The companys income statement from last month is as follows:

		Total		Per Unit
Sales revenue		$550,000		$50
Variable expenses		192,500		17.50
Contribution margin		357,500		$32.50
Fixed expenses		295,750
Operating income		$ 61,750

(a)

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Your answer is correct.

What is Cranes contribution margin ratio? Its variable cost ratio? (Round ratios to 2 percentage places, e.g. 0.38 = 38%.)

Contribution margin ratio		enter contribution margin ratio in percentages rounded to 0 decimal places	%
Variable cost ratio		enter variable cost ratio in percentages rounded to 0 decimal places	%

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(b1)

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Compute breakeven sales. (Use the rounded contribution margin ratio calculated in the previous part to compute breakeven sales.)

Breakeven sales

$enter breakeven sales amount in dollars

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(b2)

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What is Cranes margin of safety?

Margin of safety

$enter margin of safety amount in dollars

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(c)

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If Cranes sales were to increase by $200,000 with no change in fixed expenses, by how much would operating income increase? (Use the rounded contribution margin ratio calculated in the previous part to compute breakeven sales.)

Net Operating income will increase by

$enter net operating income increase amount in dollars

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(d)

Cranes managers have determined that variable costs per unit will increase by 20% beginning next month. To offset this increase in costs, they are considering a 12% increase in the sales price. Market research indicates that the price increase will result in a 3% decrease in the number of learning systems Crane sells. What will be Cranes expected operating income if the price increase is implemented? (Round per unit calculations to 2 decimal places e.g. 52.75 and final answer to 0 decimal places, e.g. 5,275.)

Operating income

$enter operating income amount in dollars rounded to 0 decimal places