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Managerial Accounting




MUST SHOW WORK;Grenville, Inc. makes table top two burner cookers used in the Caribbean and South America. Recently;sales have been declining as more families can now afford regular size stoves complete with four;burners and an oven. The company?s contribution format income statement for the most recent year is;given below;Sales (15,000 units x $60) $900,000;Variable expenses 675,000;Contribution margin 225,000;Fixed expenses 245,000;Net operating income (loss) (20,000);Required: (Round to the nearest $ as needed);1. Compute the company?s CM ratio, the company?s break-even point in units, and the company?s break-even point in sales dollars;2. The president of the company believes a $17,000 increase in the annual advertising budget will;result in an increase in quarterly sales of 1,000 units. If the president is right what will be change in;annual operating income?;3. Refer back to the original data. The sales manager is convinced that a 10% reduction in the selling;price, combined with an increase of only $10,000 in the advertising budget, will cause unit sales to;increase by 50%. Prepare the new contribution format income statement assuming these changes;were adopted.;4. Refer back to the original data. The Marketing Department thinks that a fancy design on the stove;top would increase sales. The only cost associated with the new design would be variable cost of;$2.00 per unit. Assuming no other changes, how many units would have to be sold each year to;earn a profit of $5,500?;5. Refer back to the original data. By automating certain operations, the company could reduce;variable costs by $3 per unit. However, fixed costs would increase annually by $45,000.;a. Compute the new CM ratio;b. Compute the new break-even point in units;c. Compute the new break-even point in sales dollars;d. Assume the company expects to sell 25,000 units next year. Prepare two contribution;margin format income statements, one assuming that operations are not automated and;one assuming that they are. (Show data on a per unit and percentage basis, as well as in;total, for each alternative.) The company is in the 30% tax bracket.


Paper#81389 | Written in 18-Jul-2015

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