Exam 3: Analysis of Cost, volume, and Pricing to Increase Profitability

Harris Company produces a product whose cost is $10.Assuming the company uses a cost-plus pricing system,what selling price would the company set to earn a profit margin of 20% of cost?

Write an equation for each item provided: Contribution margin per unit = Contribution margin ratio = Break-even in units = Break-even in dollars = Units required to achieve desired profit = Dollars required to achieve desired profit = Margin of safety ratio =

Ruiz Company produces and sells a product that has variable costs of $50 and a selling price of $90.Its current sales total $270,000 per month.Fixed manufacturing costs total $40,000 per month and fixed selling and administrative costs total $35,000 per month.The company is considering a proposal that will increase the selling price by 10%,increase the fixed manufacturing costs by 10%,and increase the fixed selling and administrative costs by $1,500. Required: 1)Compute the company's current break-even point in units. 2)Compute the company's current income and margin of safety in dollars. 3)Compute the break-even point in units assuming the proposal is accepted. 4)Compute the company's income assuming the proposal is accepted and sales total 3,300 units.Should the proposal be accepted?

Sanchez Company makes and sells two models of dog houses,the Puppy Palace and the Canine Castle: Puppy Palace Carine Castle Sales price per unit \ 50 \ 75 Variable cost per unit 30 50 Contribution margin per unit \ 20 \ 25 Sanchez has determined that it would break even at an annual sales volume of 5,000 units,of which 75% would be Puppy Palaces.What is the amount of Sanchez's estimated annual fixed costs?

Hatfield Company sells several different products.It calculated that,for the current year,it would break even if it achieved sales of $850,000.The company actually achieved sales of $856,000,but it incurred a loss of $6,500.What could have caused this result? The costs and selling prices for the individual products did not change.

Company A makes and sells a single product.What happens to the break-even point when total fixed costs increase?

Mitchell Company sells its product for $100 per unit.The company's accountant provided the following cost information: Manufacturing costs \ 25,000+45\% of sales Selling costs \ 15,000+20\% of sales Administrative costs \ 25,000+10\% of sales What is the company's break-even point in units?

Chester Company plans to introduce a new product.A market research specialist claims that 20,000 units can be sold at a $100 selling price.Assuming the company desires a profit margin of 22% of sales,what is the target cost per unit?

Gamble Company has a contribution margin of $20 per unit and a break-even point of 10,000 units.If Gamble sells 9,999 units,what would be its net income or loss? Explain how you calculated your answer.