Scribd Logo
Upload

Welcome to Scribd!

  • 54 views

    DMMR CVP Math

    Uploaded by

    Sabbir Zaman
    The document provides financial information for Volter Company, which manufactures and sells telephone answering machines. It includes the company's contribution format income statement for the most recent year, showing sales of 20,000 units for $1,200,000 total, variable expenses of $900,000 total (45% of sales), contribution margin of $300,000 total (15% of sales), and fixed expenses of $240,000, resulting in net operating income of $60,000. Management is looking to improve profit performance and has asked for an analysis of several items related to the company's contribution margin ratio, variable expense ratio, break-even point, impact of a sales increase, target profit level, margin of safety,

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    DMMR CVP Math

    Uploaded by

    Sabbir Zaman
    54 views2 pages
    The document provides financial information for Volter Company, which manufactures and sells telephone answering machines. It includes the company's contribution format income statement for the most recent year, showing sales of 20,000 units for $1,200,000 total, variable expenses of $900,000 total (45% of sales), contribution margin of $300,000 total (15% of sales), and fixed expenses of $240,000, resulting in net operating income of $60,000. Management is looking to improve profit performance and has asked for an analysis of several items related to the company's contribution margin ratio, variable expense ratio, break-even point, impact of a sales increase, target profit level, margin of safety,

    Original Description:

    Original Title

    DMMR_CVP_Math

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document provides financial information for Volter Company, which manufactures and sells telephone answering machines. It includes the company's contribution format income statement for the most recent year, showing sales of 20,000 units for $1,200,000 total, variable expenses of $900,000 total (45% of sales), contribution margin of $300,000 total (15% of sales), and fixed expenses of $240,000, resulting in net operating income of $60,000. Management is looking to improve profit performance and has asked for an analysis of several items related to the company's contribution margin ratio, variable expense ratio, break-even point, impact of a sales increase, target profit level, margin of safety,

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    54 views2 pages

    DMMR CVP Math

    Uploaded by

    Sabbir Zaman
    The document provides financial information for Volter Company, which manufactures and sells telephone answering machines. It includes the company's contribution format income statement for the most recent year, showing sales of 20,000 units for $1,200,000 total, variable expenses of $900,000 total (45% of sales), contribution margin of $300,000 total (15% of sales), and fixed expenses of $240,000, resulting in net operating income of $60,000. Management is looking to improve profit performance and has asked for an analysis of several items related to the company's contribution margin ratio, variable expense ratio, break-even point, impact of a sales increase, target profit level, margin of safety,

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Volter Company manufactures & sells a telephone answering machine.

    The company’s
    contribution format income statement for the most recent years is given below:
    Total Per Unit %
    Sales (20,000 units) 12,00,000 60 100
    (-) Variable expense 9,00,000 45 ?
    Contribution Margin 3,00,000 15 ?
    (-) Fixed expenses 2,40,000
    Net Operating Income 60,000

    Management is anxious to improve the company’s profit performance & has asked for an
    analysis of a number of items.

    Required:
    1. Compute the company’s cm ratio & variable expense ratio.
    2. Compute the company’s break-even point in both units & sales in dollars.(Use the
    equation method)
    3. Assume that sales increase by $ 4, 00,000 next year. If cost behavior patterns
    remain unchanged, by how much will the company’s net operating income
    increase? (Use the cm ratio to determine your answer.)
    4. Refer to the original data; assume that next year management wants the company
    to earn a minimum profit of $ 90,000. How many units will have to be sold to
    meet this target profit figure?
    5. Refer to the original data; compute the company’s margin of safety in both dollar
    & percentage form.
    6. a) Compute the company’s degree of operating leverage at the present level of
    sales?
    b) Assume that through more intense effort by the sales staff the company’s sales
    increase by 8% next year. By what percentage would you expect net operating
    income to increase? Use the operating leverage concept to obtain your answer.

    c) Verify your answer to (b) by preparing a new income statement showing an 8%


    increase in sales.

    7. In an effort to increase sales & profits, management is considering the use of a


    higher quality speaker. The higher quality speaker would increase variable cost by
    $ 3 per unit, but management could eliminate one quality inspector who is paid a
    salary of $ 30,000 per year. The sales manager estimates that the higher quality
    speaker would increase annual sales by at least 20%.

    a) Assuming that changes are made as described above, prepare a projected


    income statement for next year. Show data on a total, per unit & percentage basis.

    b) Compute the company’s new break even point in both units & dollar of sales.
    (Use the contribution margin method)

    c) Would you recommend that the changes be made?

    You might also like