Question: only the answer , thank you Uni Tech a company that supplies goods to other companies is finding that a product (called Component ABC) that


Uni Tech a company that supplies goods to other companies is finding that a product (called Component ABC) that had been seeing high growth is seeming to lose its appeal quite quickly to its customers. The following are the summary income statements for the most recent months July August September Units sales 20,000 40,000 45,000 Sales $500.000 $1.000.000 31.125.000 Prime costs $ 200,000 $400,000 $450,000 Manufacturing overhead costs 120,000 180,000 195,000 Selling & administrative expenses 65.000 105.000 115.000 Total expenses $385.000 5.685.000 260.000 Operating income $115.000 315.000 365.000 To help the company understand what its future may hold on the product, it has asked your consultancy company to provide answers for its potential plans. Consider each case independently, show computations and compute to two decimal points if necessary (DO NOT put in "comma". "dollar" or "percentage signs for your answer.) Answer: 1. Using the high-low method, compute the following: a. The variable cost per unit. b. Total fixed cost of the company. Contribution margin ratio (as percentage rate). d. Breakeven number of units. e. Breakeven dollar sales. 1111 f. Margin of safety in dollars for September. g. Degree of operating leverage for September. 2. The following are two potential plans that are being considered by the company: 2.1 The sales manager thinks that by increasing advertising budget by $80,000 in October will enable the company to earn $300,000 operating income with no other changes being made. a. How many units need to be sold to earn the target operating Income with the increase in advertising? b. What would be the expected degree of operating leverage? 2.2 Related to (2.1) above. The president agrees with increasing advertising but thinks the advertising amount should be more than what the sales manager had suggested above in (2.1). Also, to earn $300,000 target operating income, he feels that the selling price needs to be reduced by 12 percent from the original amount and this will double unit sales from the sales manager's suggestion. However, the minimum hourly wage rate is being adjusted by the government causing labor rates to increase, thus causing variable cost per unit to increase by 10 percent from the original amount. Based on this scenario, compute the following for Component ABC: a. To earn the target profit of $300,000, by how much can advertising increase from the amount suggested by the sales manager in (2.1)
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