Management has asked you to provide a snapshot of its current sales and analyze the potential...

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Management has asked you to provide a "snapshot" of its current sales and analyze the potential impacts of the economic contraction and the looming union settlement on Hera's earnings. What follows are the most current, monthly averages related to the organization's operations: Sales Price per Unit $20 (current monthly sales volume is 35,000 units) Variable costs per unit Direct Materials $55,000 Direct Labor $40,000 Variable manufacturing overhead $25,000 Variable selling and administrative expenses $20,000 Monthly Fixed Costs $50,000 $100,000 Fixed Manufacturing overhead Fixed selling and administrative expenses Required:.. 1. Contribution Margin Ratio: You will take Sales price per unit divided by variable costs per unit and then divide that number by sales price er unit. (20-4)/20= .8 2. Variable Expense Ratio: This is the Variable Costs per Unit divided by the Sales Price per Unit. 4/20= .2 3. Break-even Point in Units: This is found by dividing Total Fixed Costs by the Contribution Margin per Unit. 150,000/.8-187,500 4. Margin of Safety: This can be calculated in terms of both dollars and units. In dollars, it is Current Sales minus Break-even Sales. 700,000- 187,500 512,500 5. Estimate the number of units Hera will need to sell to earn a monthly, after-tax profit of $1,500,000. Hera's combined, corporate income tax rate is 21 percent. 6. Calculate the degree of operating leverage. 7. Management expects settling with the union will increase direct labor and fixed manufacturing overhead costs by 20 percent and $23,000 per month, respectively. Based on these projections, calculate the number of units Hera will need to sell just to breakeven. 8. Sales are expected to decrease by ten percent if the predictions of an economic downturn come true. Estimate the impact this decline would have on profitability independent of the union settlement. 9. Estimate the impact of both the drop in sales and the increased costs from the union agreement would have on profitability. Management has asked you to provide a "snapshot" of its current sales and analyze the potential impacts of the economic contraction and the looming union settlement on Hera's earnings. What follows are the most current, monthly averages related to the organization's operations: Sales Price per Unit $20 (current monthly sales volume is 35,000 units) Variable costs per unit Direct Materials $55,000 Direct Labor $40,000 Variable manufacturing overhead $25,000 Variable selling and administrative expenses $20,000 Monthly Fixed Costs $50,000 $100,000 Fixed Manufacturing overhead Fixed selling and administrative expenses Required:.. 1. Contribution Margin Ratio: You will take Sales price per unit divided by variable costs per unit and then divide that number by sales price er unit. (20-4)/20= .8 2. Variable Expense Ratio: This is the Variable Costs per Unit divided by the Sales Price per Unit. 4/20= .2 3. Break-even Point in Units: This is found by dividing Total Fixed Costs by the Contribution Margin per Unit. 150,000/.8-187,500 4. Margin of Safety: This can be calculated in terms of both dollars and units. In dollars, it is Current Sales minus Break-even Sales. 700,000- 187,500 512,500 5. Estimate the number of units Hera will need to sell to earn a monthly, after-tax profit of $1,500,000. Hera's combined, corporate income tax rate is 21 percent. 6. Calculate the degree of operating leverage. 7. Management expects settling with the union will increase direct labor and fixed manufacturing overhead costs by 20 percent and $23,000 per month, respectively. Based on these projections, calculate the number of units Hera will need to sell just to breakeven. 8. Sales are expected to decrease by ten percent if the predictions of an economic downturn come true. Estimate the impact this decline would have on profitability independent of the union settlement. 9. Estimate the impact of both the drop in sales and the increased costs from the union agreement would have on profitability.