DATA: Selling price per unit = $20 Variable Expenses per unit = Old Variable exp

Question

DATA:

Selling price per unit = $20
Variable Expenses per unit = Old Variable expenses –reduced price
Variable Expenses per unit = $10 - $3
Variable Expenses per unit = $7

Fixed Expenses = Old Fixed Expenses + Increased Expenses
Fixed Expenses = $145,000 + $52,000
Fixed Expenses = $197,000

Contribution Margin = Selling Price – Variable Expenses
Contribution Margin per unit = $20 - $7
Contribution Margin per unit = $13

what is %

Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed e by $52,000 each month. Assume that the company expects to sell 20,200 units next month. Prepare two contribution fo statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per uni as well as in total, for each alternative.) (Do not round your intermediate calculations. Round your percentage answers number.) PEM, Inc. Contribution Income Statement Not Automated Automated Total Per Unit Total Per Unit $404,000 202,000 202,000$ 145,000 $57,000 Sales 20 10 10 % $ 404,000 $ 20 ariable expenses Contribution margin Fixed expenses Net operating income 141,400 262,600 $ 197,000 65,600 01% 13 01%

Explanation / Answer

% means percentage as of sales.

For " Not Automated "

Sales = (20 / 20) x 100 = 100%

Variable expenses = (10 / 20) x 100 = 50%

Contribution margin = (10 / 20) x 100 = 50%

For " Automated "

Sales = (20 / 20) x 100 = 100%

Variable expenses = (7 / 20) x 100 = 35%

Contribution margin = (13 / 20) x 100 = 65%

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