Ans 1

15% comission 20% commission

Sales S 18,500,000 18,500,000

Variable expenses:

Manufacturing 8,325,000 8,325,000

Commissions (15%, 20%, 7.5%) 2,775,000 3,700,000

Total variable expenses 11,100,000 12,025,000

Contribution margin 7,400,000 6,475,000

CM ratio CM/Sales*100 A 40 35

Fixed expenses:

Manufacturing overhead 2,590,000 2,590,000

Marketing 129,500 129,500

Administrative 1,900,000 1,900,000

Interest 647500 647500

Total fixed expenses 5,267,000 5,267,000

Income before income taxes 2,133,000 1,208,000

Income taxes (30%) 639,900 362,400

Net income 1,493,100 845,600

ans 1

Breakeven point Fixed cost/CM ratio 13,167,500.00 15048571

5267000/.4 5267000/.35

ans 2

Sales=(Income before taxes+Fixed exp)/CM ratio

sales (2133000+5267000)/.35 21,142,857.00

ans 3

we need to equlaise the sales volume

S= Total sales volume

.65s+5267000=.525s+7956900

.65-.525=7956900-5267000 21519200

ans 4 15% comission 20% commission

Contrubution Margin a 7,400,000 6,475,000

Income before taxes b 2,133,000 1,208,000

Degree of operating leverage a/b 8.67 15.31

 own sales force

18,500,000

8,325,000

1,387,500

65 9,712,500 52.5

8,787,500

47.5

2,590,000

2,904,500 (129500+2775000)

1814900 (1900000-85100)

647500

7,956,900

830,600
 249,180

581,420

16751368

7956900/.475

ans 2

own sales force

8,787,500
830,600

22.27
 15% Ratio

Sales 16,000,000 100.0%

Less: Variable Manufacturing Cost 7,200,000
Commision 2,400,000
Total Variable Expenses 9,600,000 60.0%
Contribution Margin 6,400,000 40.0%
Less: Fixed Manufacturing Cost 2,340,000
Fixed Marketing Cost 120,000
Fixed Administrative Cost 1,800,000
Fixed Interest Cost 540,000
Total Fixed Cost 4,800,000
Income Before Tax 1,600,000
Less: Income Tax (30%) 480,000
Income After Tax 1,120,000

1.)
Total Fixed Cost 4,800,000
Contribution Margin Ration 40%

Break-even point in Sales Dollars (FC/CMR) 12,000,000

2.)
Fixed Cost 4,800,000
Profit 1,120,000
Total 5,920,000
Contribution Margin Ratio 40%
Sales 14,800,000 Units
 20% Ratio

16,000,000
7,200,000
3,200,000
10,400,000 65.0%
5,600,000 35.0%
2,340,000
120,000
1,800,000
540,000
4,800,000
800,000
240,000
560,000

4,800,000
35%

13,714,285.71
 Own Sales Force
Ratio
(Commission = 7.5%)

16,000,000 100.0%
7,200,000
1,200,000
8,400,000 52.5%
7,600,000 47.5%
2,340,000
2,520,000
1,725,000
540,000
7,125,000
475,000
142,500
332,500

7,125,000
48%

15,000,000.00
3.)
Variable Cost Ratio (Sales) + Fixed Cost = Variable Cost Ratio (Sales) + Fixed Cost
0.65(S) + 4,800,000 .475(S) + 7,125,000
0.65(S) - 0.475 (S) 7,125,000 - 4,800,000
0.175 2325000
0.175 0.175
Sales = 13,285,714.29
4.)
15% 20% Own Sales Force
Contribution Margin 6,400,000 5,600,000 7,600,000
Income Before Tax 1,600,000 800,000 475,000
Degree of Operating Leverage
(CM/IBIT) 4 7 16