Zaldor Corporation sells a specialized speaker and has the following information for the current year:
|
|
Total
|
Per Unit
|
Percent of Sales
|
|
Sales (25,000 units)
|
1,250,000
|
50
|
100%
|
|
Variable expenses
|
750,000
|
30
|
? %
|
|
Contribution margin
|
500,000
|
20
|
? %
|
|
Fixed expenses
|
400,000
|
|
|
|
Net operating income
|
100,000
|
|
|
Required:
- Calculate the variable expense ratio
- Calculate the contribution margin ratio
- Calculate break even sales in units
- Calculate break even sales in dollars
- How many units must be sold to make a profit of $250,000?
Management is considering increasing the quality of its units by spending $3 more per unit in variable costs and adding a quality inspector for an additional $40,000 annual fixed cost. Management believes this change will increase unit sales by 20% at the same price.
- Calculate the new profit or loss if the changes are implemented.
- Would you recommend management make the changes? Why or why not?
You should use an Excel spreadsheet for your answers.