Question

Zaldor Corporation sells a specialized speaker and has the following information for the current year:

	Total	Per Unit	Percent of Sales
Sales (20,000 units)	1,200,000	60	100%
Variable expenses	800,000	40	? %
Contribution margin	400,000	20	? %
Fixed expenses	250,000
Net operating income	150,000

Required:

A. Calculate the variable expense ratio

B. Calculate the contribution margin ratio

C. Calculate break-even sales in units

D. Calculate break-even sales in dollars

E. How many units must be sold to make a profit of $300,000?

Answer 1

a. variable expense ratio=Variable expense/Sales

=(800.000/1,200,000)=66.67%(Approx)

b.contribution margin ratio=contribution margin/Sales

=(400,000/1,200,000)=33.33%(Approx)

c.Breakeven point=Fixed expenses/contribution margin

=(250,000/20)=12500 units

d.Breakeven value=Fixed expenses/contribution margin ratio

=(250,000/33.33%)=750,000

e.Target contribution margin=Fixed expenses+Target profits

=(250000+300,000)=$550,000

Hence units to be sokd=(550,000/20)

=27500 units.