Question

High Tech Manufacturing manufactures 256GB SD cards (memory cards for mobile phones, digital cameras, and other devices). Price and cost data for a relevant range extending to 200.000 units per month are as follows: E (Click the icon to view the data.) Data Table Read the requirements. Requirement 1. What is the company's contribution margin per unit? Contribution margin percentage? Total contribution margin? (current monthly sales volume is 130,000 units) Sales price per unit: 20.00 Begin by identifying the formula. Variable costs per unit: Contribution margin per unit Direct materials 6.70 Direct labor 7.00 The contribution margin per unit is $ Variable manufacturing overhead 2.00 What is the company's contribution margin percentage? Variable selling and administrative expenses 1.80 Begin by identifying the formula. Monthly fixed expenses: Contribution margin percentage ) = Fixed manufacturing overhead 102,300 Fixed selling and administrative expenses $ 187,800 (Round your answer to the nearest whole percent.) The contribution margin percentage is %. Requirements What is the company's total contribution margin? Begin by identifying the formula. Contribution margin 1. What is the company's contribution margin per unit? Contribution margin percentage? Total contribution margin? 2. What would the company's monthly operating income be if the company sold 160,000 units? The total contribution margin is $ 3. What would the company's monthly operating income be if the company had sales of $4,500,000? 4. What is the breakeven point in units? In sales dollars? 5. How many units would the company have to sell to earn a target monthly profit of $260,100? 6. Management is currently in contract negotiations with the labor union. If the negotiations fail, direct labor costs will increase by 10%, and fixed costs will increase by $22,500 per month. If these costs increase, how many units will the company have to sell each month to break even? Requirement 2. What would the company's monthly operating income be if the company sold 160,000 units? Use the following table to compute the operating income if 160,000 units are sold. 7. Return to the original data for this question and the rest of the questions. What is the company's current operating leverage factor (round to two decimals)? 8. If sales volume increases by 7%, by what percentage will operating income increase? 9. What is the company's current margin of safety in sales dollars? What is its margin of safety as a percentage of sales? Less: 10. Say the company adds a second size of SD card (512GB in addition to 256GB). A 512GB SD card will sell for $45 and have variable cost per unit of $28 per unit. The expected sales mix is six of the 256GB SD cards for every one of the 512GB SD cards. Given this sales mix, how many of each type of SD card will the company need to sell to reach its target monthly profit of $260,100? Is this volume higher or lower than previously needed (in Question 5) to achieve the same target profit? Why? Chooss from any list or enter any number in the innut fields and then ccontinue to the next a Uestion

Answer 1

Req1.

Selling price per unit	$20
Less: variable cost	($17.50)
($6.7+$7+$2+$1.8)
Contribution margin per unit	$2.50

Contribution margin percentage     =	Contribution margin per unit
	Selling price
	$2.50	12.50%
	$20

Total Contribution margin = 130,000 units $\times$ $2.5 = $325,000

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Req2.

	Amount
Sales revenue (160,000 units × $20)	$3,200,000
Less: Variable cost (160,000 units × $17.5)	($2,800,000)
Contribution margin	$400,000
Less: fixed cost ($102300+$187800)	($290,100)
Net Operating income	$109,900

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Req3.

Sales revenue (A)	$4,500,000
Contribution margin percentage (B)	12.50%
Contribution margin (A× B)	$562,500
Less: fixed cost ($102300+$187800)	($290,100)
Net Operating income	$272,400

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Req4.

Compute Breakeven point in units:

Breakeven point in units = Fixed Cost/Contribution margin

= $290100/$2.5

= 116,040 units

Compute Breakeven point in sales dollars:

Breakeven point = Fixed Cost/Contribution margin ratio

= $290100/12.5%

= $2,320,800

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Req5.

Compute Breakeven point in units, if co. earns target profits $260,100

Breakeven point in units = Fixed Cost + Target profits/Contribution margin per unit

= $290100 + $260,100/$2.5

= 220,080 units