Basics of cost-volume-profit

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Reference no: EM1347403

Feather Friends, Inc., distributes the high-quality wooden birdhouse which sells for $20 for each unit. Variable costs are $8 per unit, and fixed costs total $180,000 per year.

Required:

Answer the following independent questions:

1. What is the product's CM ratio?

2. Use the CM ratio to determine the break-even point in sales dollars.

3. Due to an increase in demand, the company estimates that sales will increase by $75,000 during the next year. By how much should net operating income increase (or net loss decrease) assuming that fixed costs do not change?

Reference no: EM1347403

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