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##### Depardieu Company_CVP Analysis

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**Question**

Question;Depardieu Company.;produces drone video helicopters for recreational surveillance. Sales have been;very erratic, with some months showing a profit and some months showing a loss.;The company's contribution format income statement for the most recent month is;given below;Sales;(12,900 units at $40 per unit) $516,000;Variable;expenses 309,600;Contribution margin 206,400;Fixed;expenses 230,400;Net operating loss $(24,000);Required;1. Compute;the company's CM ratio and its break-even point in both units and dollars.;(Omit the "%" and "$" signs in your response.);CM;ratio %;Break-even;point in units;Break-even;point in dollars $;2.The sales manager feels that an $6,000;increase in the monthly advertising budget, combined with an intensified effort;by the sales staff, will result in a $86,000 increase in monthly sales. If the;sales manager is right, what will the revised net operating income or loss?;(Use the incremental approach in preparing your answer.) (Omit the;$" sign in your response.);is;$;3. Refer to the original data. The president is;convinced that a 10% reduction in the selling price, combined with an increase;of $38,000 in the monthly advertising budget, will double unit sales. What will;the new contribution format income statement look like if these changes are;adopted? (Input all amounts as positive values except losses which should be;indicated by minus sign. Omit the "$" sign in your response.);Contribution Income Statement $;$;4.Refer to the original data. The;company?s advertising agency thinks that a new package would help sales. The;new package being proposed would increase packaging costs by $0.40 per unit.;Assuming no other changes, how many units would have to be sold each month to;earn a profit of $5,000? (Round your intermediate calculations to 2 decimal;places and final answer to the nearest whole number.);Sales;units;5. Refer to the;original data. By automating, the company could slash its variable expenses in;half. However, fixed costs would increase by $116,000 per month.;a.Compute the new CM ratio and the new;break-even point in both units and dollars. (Do not round intermediate;calculations. Round your final answers to the nearest whole number. Omit the;%" and "$" signs in your response.);CM;ratio %;Break-even;point in units;Break-even;point in dollars $;b. Assume that the company expects to sell 20,600;units next month. Prepare two contribution format income statements, one;assuming that operations are not automated and one assuming that they are.;(Omit the "$" and "%" signs in your response.);Not;Automated;Automated;Total;Per Unit % Total Per Unit %;$ $ $;$;$ $

Paper#37287 | Written in 18-Jul-2015

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