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
|
? %
|
|
Fixedexpenses
|
400,000
|
|
|
|
Net operating income
|
100,000
|
|
|
Required:
1. Calculate the variable expense ratio
2. Calculate the contribution margin ratio
3. Calculate break even sales in units
4. Calculate break even sales in dollars
5. 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.
6. Calculate the new profit or loss if the changes are implemented.
7. Would you recommend management make the changes? Why or whynot?
You should use an Excel spreadsheet for your answers.