Question

Exercise 18-17 (Part Level Submission) Felde Bucket Co., a manufacturer of rain barrels, had the following data for 2016. Sales 2,000 units Sales price $30 per unit Variable costs $18 per unit Fixed costs $11,520 Collapse question part (a) Correct answer. Your answer is correct. What is the contribution margin ratio? (Round answer to 0 decimal places, e.g. 5,275.) Contribution margin ratio Entry field with correct answer 40 % Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION SHOW ANSWER LINK TO TEXT Attempts: 1 of 5 used Collapse question part (b) Correct answer. Your answer is correct. What is the break-even point in dollars? (Round intermediate calculation and final answers to 0 decimal places, e.g. 5,275.) Break-even point $Entry field with correct answer 28800 Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION SHOW ANSWER LINK TO TEXT Attempts: 1 of 5 used Collapse question part (c) Correct answer. Your answer is correct. What is the margin of safety in dollars and as a ratio? (Round ratio to 2 decimal places, e.g. 12.25.) Margin of safety $Entry field with correct answer 31,200 Margin of safety ratio Entry field with correct answer 52 % Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION SHOW ANSWER LINK TO TEXT Attempts: 1 of 5 used Collapse question part (d) If the company wishes to increase its total dollar contribution margin by 30% in 2017, by how much will it need to increase its sales if selling price per unit, variable price per unit and total fixed costs remain constant? (Round answer to 0 decimal places, e.g. 2,520.) Total increase in sales required

Answer 1

All parts are solved except part d. Please find below the solution for Part d.

Present Total Contribution Margin = (Unit Selling Price $30 – Unit Variable Expense 18) * Number of Units 2,000

= $24,000

Present Contribution Margin Ratio = (Unit Selling Price $30 – Unit Variable Expense 18)   / Unit Selling Price $30 * 100

= 40%

Desired Contribution Margin in 2017 = $24,000 + 30% Increase of $24,000 = $31,200

Required Sales in dollar to get desired contribution margin in 2017 = Desired Contribution Margin $31,200 / Contribution Margin Ratio

= $31,200 / 40%

= $78,000

Selling price per unit (remain constant) = $30 per unit

Desired Sales in units = $78,000 / 30 = 2,600 Units

Total increase in sales required in dollars = Desired $78,000 – Present 60,000

= $18,000