west company a sole proprietership, sells only on product -gag calculators that

Question

west company a sole proprietership, sells only on product -gag calculators that randomly return incorrct answers. The regular price is $100. Variable costs are 65% of this selling price. The company's fixed costs are $35,000 a month.

At the selling price of $100, what is the contribution margin ratio?

______%

At the selling price of $100 what dollar volume of sales per month is required for West to break even?

$_______

At the selling price of $100, what dollar volume of sales per month is required for West company to earn a monthly operating income of $15,000?

$______

Assuming that monthly sales are currently $150,000 a month, what is West's margin of safety?

$_______

Management decides to decrease the selling price from $100 to $86.67 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision.

At the reduced selling price of $86.67 per unit, what is the contribution margin ratio?

________%

At the reduced selling price of $86.67 per unit, what dollar volume of sales per month is required to break even?

$_______

Explanation / Answer

At the selling price of $100, what is the contribution margin ratio? ______% (100-100*.65)/100 = 0.35 which is 35% Answer: 35% At the selling price of $100 what dollar volume of sales per month is required for West to break even? $_______ 35,000/0.35 = 100,000 Answer: $100,000 At the selling price of $100, what dollar volume of sales per month is required for West company to earn a monthly operating income of $15,000? $______ (15,000+35,000)/0.35 = $142,857.14 Answer: $142,857.14 Assuming that monthly sales are currently $150,000 a month, what is West's margin of safety? $_______ Margin of safety = actual sales – breakeven sales = $150,000 – 100,000 = $50,000 Answer: $50,000 Management decides to decrease the selling price from $100 to $86.67 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision. At the reduced selling price of $86.67 per unit, what is the contribution margin ratio? ________% (86.67-65)/86.67 = 0.2500 which is 25% Answer: 25% At the reduced selling price of $86.67 per unit, what dollar volume of sales per month is required to break even? 35,000/0.25 = 140,000 Answer: $140,000

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