Zaldor Corporation (100 Points): Complete the following questions using Microsof

ID: 2338380 • Letter: Z

Question

Zaldor Corporation (100 Points):

Complete the following questions using Microsoft Word or Excel, as appropriate. Review the grading rubric to confirm you are meeting the assignment requirements.

Zaldor Corporation sells a specialized speaker and has the following information for the current year:

66.67%

33.33%

150,000

Management is considering increasing the quality of its units by spending $3 more per unit in variable costs and adding a quality inspector for an additional $40,000 annual fixed cost. Management believes this change will increase unit sales by 20% at the same price.

1. Calculate the new profit or loss if the changes are implemented.

2. Would you recommend management make the changes? Why or why not?

Total Per Unit Percent of Sales Sales (20,000 units) 1,200,000 60 100% Variable expenses 800,000 40

66.67%

Contribution margin 400,000 20

33.33%

Fixed expenses 250,000 Net operating income

150,000

Explanation / Answer

Revised units= 20000*120% = 24000units

Per unit($ )

Total ($)

Percent

Sales

1,440,000

100

Less: Variable costs

1,032,000

71.67

Contribution Margin

408,000

28.33

Less: Fixed Costs(250,000+40,000)

290,000

Operating Income/(loss)

118,000

2. Recommendation

I will not recommend the change because the profit has decreased at the revised sales level

Profit after changes = 118,000

Less: Profit before changes = 150,000

Decrease in Profit = (32,000)