Question

Minden Company manufactures a high-quality wooden birdhouse that sells for $30 per unit. Variable costs are $6 per unit and fixed costs total $180,000. During 2018, the company sold 50,000 birdhouses to customers. The president of Minden Company believes the following changes should be made in 2019: 1. the selling price of the birdhouse should be increased by 20% 2. increase advertising by $30,000 Assume these changes are made. Calculate thenumber of units Minden Company must sell in 2019 in order to earn a net income that is 80% greater than the net income earned in 2018.

Answer #1

Sale price per unit | $30 | |

Less :- variable cost per unit | $6 | |

Contribution per unit | $24 | |

Total Contribution | ||

(50000 birdhouses x $24) | $1,200,000 | |

Less :- Fixed Cost | $180,000 | |

Profit for 2018 | $1,020,000 | |

Increase in profit 80% | $816,000 | |

Desired profit for 2019 | $1,836,000 | |

($1,020,000+$816,000) | ||

New Selling price for 2019 | $36 | |

($30+20% of $30) | ||

Less:- variable cost per unit | $6 | |

Contribution per unit | $30 | |

Now, | ||

Let suppose Desired quantity = Q | ||

Desired Profit= Contribution per unit x Q - ( increased advertisement exp.+ Fixed Cost | ||

$1,836,000 = 30 x Q - ( $30,000+$180,000) | ||

30Q = $1,836,000+$210,000 | ||

Q = 68,200 birdhouses | ||

Number of birdhouses should be sold by Minden Company in 2019 = 68,200 birdhouses | ||

Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $80 per unit. Variable expenses are $40.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows:
Sales
$
2,160,000
Variable expenses
1,080,000
Contribution margin
1,080,000
Fixed expenses
180,000
Net operating income
$
900,000
6. The president does not want to change the selling price.
Instead, he wants to increase the sales commission by $1.60 per
unit. He thinks that this...

Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows:
Sales
$
1,040,000
Variable expenses
520,000
Contribution margin
520,000
Fixed expenses
180,000
Net operating income
$
340,000
5. The sales manager is convinced that a 12% reduction in the
selling price, combined with a $77,000 increase in advertising,
would increase this year's unit sales...

Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $80 per unit. Variable expenses are $40.00
per unit, and fixed expenses total $200,000 per year. Its operating
results for last year were as follows:
Sales
$
2,240,000
Variable expenses
1,120,000
Contribution margin
1,120,000
Fixed expenses
200,000
Net operating income
$
920,000
The president does not want to change the selling price.
Instead, he wants to increase the sales commission by $1.70 per
unit. He thinks that this move,...

Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $80 per unit. Variable expenses are $40.00
per unit, and fixed expenses total $160,000 per year. Its operating
results for last year were as follows:
Sales
$
1,920,000
Variable expenses
960,000
Contribution margin
960,000
Fixed expenses
160,000
Net operating income
$
800,000
6. The president does not want to change the selling price.
Instead, he wants to increase the sales commission by $1.80 per
unit. He thinks that this...

Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $80 per unit. Variable expenses are $40.00
per unit, and fixed expenses total $180,000 per year.
Answer the following independent questions:
1.What is the product's CM ratio?
2. Use the CM ratio to determine the break-even point in dollar
sales.
3. Due to an increase in demand, the company estimates that
sales will increase by $50,000 during the next year. By how much
should net operating...

Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows:
Sales
$
1,080,000
Variable expenses
540,000
Contribution margin
540,000
Fixed expenses
180,000
Net operating income
$
360,000
Required:
Answer each question independently based on the original
data:
1. What is the product's CM ratio?
2. Use the CM ratio to determine the break-even point...

Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $80 per unit. Variable expenses are $40.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows:
Sales
$
2,160,000
Variable expenses
1,080,000
Contribution margin
1,080,000
Fixed expenses
180,000
Net operating income
$
900,000
Required:
Answer each question independently based on the original
data:
1. What is the product's CM ratio?
2. Use the CM ratio to determine the break-even point...

Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $80 per unit. Variable expenses are $40.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows:
Sales
$
2,160,000
Variable expenses
1,080,000
Contribution margin
1,080,000
Fixed expenses
180,000
Net operating income
$
900,000
Required:
Answer each question independently based on the original
data:
1. What is the product's CM ratio?
2. Use the CM ratio to determine the break-even point...

Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $80 per unit. Variable expenses are $40.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows:
Sales
$
2,160,000
Variable expenses
1,080,000
Contribution margin
1,080,000
Fixed expenses
180,000
Net operating income
$
900,000
Required:
Answer each question independently based on the original
data:
1. What is the product's CM ratio?
2. Use the CM ratio to determine the break-even point...

Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows:
Sales
$
1,000,000
Variable expenses
500,000
Contribution margin
500,000
Fixed expenses
180,000
Net operating income
$
320,000
Required:
Answer each question independently based on the original
data:
1. What is the product's CM ratio?
2. Use the CM ratio to determine the break-even point...

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