ACG 2071-Comprehensive Problem III When submitting the completed project, it sho
ID: 2407968 • Letter: A
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ACG 2071-Comprehensive Problem III When submitting the completed project, it should include: 1. Please show all work and number each answer accordingly 2. Round all answers to two decimal places. Part I-Use CVP to Plan Profits-(worth a total of 21 points-3 points for each question Nottingham News Company has the rights to sell and deliver the city newspaper in a designated area in the country. A monthly subscription sells for $30.00 and Nottingham News pays $10.00 per month for each newspaper subscription. In addition to this variable cost, Nottingham News has fixed costs of $3,000 per month. Nottingham News currently activity level is 700 subscriptions Required 1. Calculate the contribution margin ratio and explain the ratio as it pertains to Nottingham News Company. 2. Use the mathematical formula to calculate Nottingham News' monthly breakeven point in units (number of subscriptions). 3. Use the shortcut contribution margin approach to calculate Nottingham News monthly breakeven in units (number of subscriptions). 4. Prove the breakeven point by preparing a contribution margin income statement 5. Use the contribution margin ratio, which you calculated in number one to compute Nottingham News' breakeven point in sales dollars. Calculate the margin of safety ratio and explain the ratio as it pertains to Nottingham News Company. 6. 7. The owner of Nottingham News' wants to earn a $10,000 profit per month. Calculate the sales volume in units (number of subscriptions) and sales dollars required to achieve this level of profit.Explanation / Answer
1)contrition margin per unit =selling price -variable cost per unit
= $30 -$ 10 = $20
Contribution margin ratio =contribution margin per unit/selling price
= $20/$30= 0.66666 or 66.66percent
2) break even point = fixed cost /contribution margin per unit
= $3000'$20 = $150 subscriptions per month
Or
3)BE P=fixed cost /selling price -vc per unit
=$3000/30-10
=$3000'$20=150subcriptions
4) sales ( 30*750) =$22500
- variable cost (10*750)=$7500
Contribution =$15000
- Fixed cost. $3000
Profit = $$12000
5) BEP in sales dollars =150 units *$30 per unit! $4500
6) margin of safety is the difference between the actual sales and BEP sales
MS= actual sales - BEP sales
=750- 150 =600 subscriptions
Ratio = 600/750= 0.8 or 80percent
7) sales volume to earn a profit of $10000=
Fixed cost +desired profit / contribution margin per unit
= $3000+$10000 /$20
=$13000/$20= 650 subscriptions are needed for getting a profit of $10000
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