Glory Engineering Ltd manufactures an engine vacuum cleaner called the EAC. Cost and revenue data for...

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Glory Engineering Ltd manufactures an engine vacuum cleaner called the "EAC". Cost and revenue data for the "EAC" are given below, based on sales of 50,000 units. Question 5 Sales revenue Less: variable costs Contribution margin Less: fixed costs Net profit Total $2,000,000 $1,400,000 $600,000 $240,000 $360,000 Required: (a) Calculate the break-even point in units AND in sales dollars. (6 marks) (b) The company intends to increase promotion of its products by increasing its advertising budget by $60,000. As a consequence, sales units are expected to increase by 8,000. Calculate the net profit if these changes occur. (5 marks) (c) How many units of product would the company have had to sell to earn a target net profit of $600,000? Determine the margin of safety (in dollars) based on the current sales level. (5 marks) (d) Calculate the degree of operating leverage AND advise the management about the percentage increase in net profit if they estimate an increase of 10 percent on the sales revenue. (4 marks) 0. = = <b>. 66 Glory Engineering Ltd manufactures an engine vacuum cleaner called the "EAC". Cost and revenue data for the "EAC" are given below, based on sales of 50,000 units. Question 5 Sales revenue Less: variable costs Contribution margin Less: fixed costs Net profit Total $2,000,000 $1,400,000 $600,000 $240,000 $360,000 Required: (a) Calculate the break-even point in units AND in sales dollars. (6 marks) (b) The company intends to increase promotion of its products by increasing its advertising budget by $60,000. As a consequence, sales units are expected to increase by 8,000. Calculate the net profit if these changes occur. (5 marks) (c) How many units of product would the company have had to sell to earn a target net profit of $600,000? Determine the margin of safety (in dollars) based on the current sales level. (5 marks) (d) Calculate the degree of operating leverage AND advise the management about the percentage increase in net profit if they estimate an increase of 10 percent on the sales revenue. (4 marks) 0. = = <b>. 66

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a Breakeven point in units Fixed Costs Contribution Margin 240000 600000 ... View the full answer