$600,000 $120,000 90,000 75,000 120,000 405,000 $195,000 $ 15,000 90,000 105,000
ID: 2587195 • Letter: #
Question
$600,000
$120,000
90,000
75,000
120,000
405,000
$195,000
$ 15,000
90,000
105,000
$ 90,000
If the monthly sales volume increases by 450 units, DesMaris Company's monthly profits will increase by
Sales ($60 × 10,000)$600,000
Cost of goods sold: Direct materials ($12 × 10,000)$120,000
Direct labor ($9 × 10,000)90,000
Variable factory overhead ($7.50 × 10,000)75,000
Fixed factory overhead120,000
405,000
Gross profit$195,000
Selling and administrative expenses: Variable ($1.50 × 10,000)$ 15,000
Fixed90,000
105,000
Operating income$ 90,000
Explanation / Answer
Answer:
The monthly profit will increase by the Contribution Margin pn the additional units sold.
Contribution Margin = Sales- Variable Expenses
Variable Expense per unit = $12 + $9 + $7.50 + $1.50
Variable Expense per unit = $30
Variable Expenses of Additional 450 units sold = 450 * $30
Variable Expenses of Additional 450 units sold = $13,500
Contribution Margin on additional 450 units sold = ($60 * 450) - $13,500
Contribution Margin on additional 450 units sold = $27,000 - $13,500
Contribution Margin on additional 450 units sold = $13,500
Therefore, the monthly profit will increase by $13,500 on increase of units sold by 450.
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