Expense

A

Identify each of the expenses:

Fixed

Variable

Mixed

What will total expenses be$,$ if:

$24,000$ units are sold?

Cost$-$Volume$-$Profit Analysis

Melon Company produces a knockoff watch that sells for $$40$ each. Variable

costs are $$12$ each and fixed costs are $$210,000$ each year.

Required:

What is this product's contribution margin ratio $($CM $\%)?$

What is this company's break$-$even point in sales dollars?

If sales increase $$400,000,$ how much will net income increase

$($assuming they are operating within the relevant range and fixed costs

do not change$)?$

Assume $20,000$ units were sold last year and Melon Company's income

statement appeared as follows.

a$)$ Compute Melon Company's degree of operating leverage for

last year.

b$)$ If sales are expected to increase $10\%$ next year, by what

percentage will net income increase?

Refer to the data at the top of this problem.

a$)$ Assume Melon sold $30,000$ units last year. Prepare an income

statement in contribution form.

b$)$ The president believes that a $10\%$ reduction in sales price

$($which will not decrease their variable costs$)$ and an increase

of $$90,000$ in advertising $($a fixed cost$)$ will increase sales by

$10,000$ units. Prepare an income statement in contribution

form.

c$)$ Would you recommend following the president's

recommendations?