Zeke Medical Supplyis a etailer of home medical equipment Last year, Zeke\'s a e
ID: 2341000 • Letter: Z
Question
Zeke Medical Supplyis a etailer of home medical equipment Last year, Zeke's a es re enes totaled $6200000 Total expenses eno sa 500 000 or ns amount appronr a ess 2000 remainder were fixed Since Zeke's offers thousands of different products, its managers prefer to calculate the breakeven point in terms of sales dolars rather than unts Read the requiremernts are e atle at . Requirement 1. What is Zeke's current operating income? Begin by identifying the formula to compute the operating income. Sales revenue Fixed expenses Veriable expenses Operating income The operating inoome is $ 3,700,000 Requirement 2. What is Zeke's oontribution margin ratio? Begin by identifying the formula to compute the conbibution margn raio Contr bution margin ales revenue Coninbution margin rato (Erter the ratio as a whole percent) The contribution margin ratio is Requirement 3 what's the oompany's breakeven point in sales dolas? t The contribution magn ratio calaated Bagin by identifying the formala to compube the breakeven point in sales dollers Reg rement 2 aiready weghted by the company's actual sales mixExplanation / Answer
Requirement 4:
If Zeke embarks on this advertising campaign, sales revenue and variable costs will rise by 20% which will cause the contribution margin to increase by 20%. However, fixed costs will rise by $240000 due to the advertising.
Annual operating income = (120% x $4588000) - ($888000 + $240000) = $5505600 - $1128000 = $4377600
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