6-19

1.Sales 1050000

Variable expenses 600000

Contribution margin 450000

Fixed expenses 540000

Net operating loss (90000)

2.540000/30 per unit

=18000 units

18000 x 70=1260000

3.the maximum profit is 270000.This level of profit can be earned by selling 45000 units at a price of 58
each.

4.540,000/18=30000

30000x58=1470000

5.

6-20

1.a.Selling price $25 100%

Variable expenses $15 60%

Contribution margin $10 40%

Profit=Unit CM x Q-Fixed expenses

0=10 x Q-210000

10Q=210000

Q=210000/10

Q=21000 balls

b. the degree of operating leverage is:

=300000/90000=3.33

2.The new CM ratio will be:

Selling price 25 100%

Variable expenses 18 72%

Contribution margin 7 28%

Profit=Unit CM x Q – Fixed expenses

0=7 x Q-210000

7Q=210000

Q=210000/7

Q=30000 balls

3.Profit=Unit CM x Q-fixed expenses

90000=7 x Q-210000

7Q=90000+210000

Q=42857 balls

4.P=18+0.4P

0.6P=18

P=18/0.6

P=30

5.Selling price 25 100%

Variable expenses 9 36%

Contribution margin 16 64%

Profit=Unit CM x Q-fixed expenses

16Q=420000

Q=420000/16

Q=26250 balls

6.a.

90000=16 x Q-420000

16Q=90000+420000

Q=510000/16

Q=31875 balls

b.

Sales 750000

Variable expenses 270000

Contribution margin 480000

Fixed expenses 420000

Net operating income 60000

c.there is no clear answer as to whether one should have been in favor of constructing the new plant.

6-22

1.

Sales 585000 30 100%

Variable expenses 409500 21 70%

Contribution margin 175500 9 70%

O=(30-21)xQ-180000

0=(9)xQ-180000

9Q=180000

Q=180000/9

Q=20000 units

20000x30=600000

2.80000 increased sales x 0.3 CM ratio 24000

Less:increased advertising cost 16000

Increase in monthly net operating income 800

3.sales 1053000

Variable exp 819000

Cont. mar. 234000

Fixed exp 240000

Net operating loss 6000

4.9750=(30-21.75)xQ-180000

9750=(8.25)xQ-180000

8.25Q=189750

Q=189750/8.25

=23000

5.a.
Sales 30 100%

Var. exp. 18 60%

Cont. marg. 12 40%

New break-even point:

=180000+72000

0.4

=630000

b.

Not automated automated

Sales 78000 30 100 780000 30 100

Var. exp 46000 21 70 468000 18 60

Cont. marg. 234000 9 30 312000 12 40

Fixed exp. 180000 252000

Net operating inc 54000 60000

c.Let Q=point of indifference in units sold

21000Q+180000=18000+252000

3000=72000/3

Q=24000 units

6-24

1. Selling price 13.5

Var. exp.:

Purchase cost of the sweatshirts 8

Commission to the student salesperson 1.5 9.5

Cont. marg. 4

=1200

=300
2.Selling price 13.5

Variable exp 1.5 9.5

Cont. marg. 12

=600/12

=50 sweatshirts

50 sweatshirts x 13.5 per sweatshirt

=675 in total sales