By how much would operating income increase

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Reference no: EM133074633

Question - Crane sells a learning system that helps preschool and elementary students learn basic math facts and concepts. The company's income statement from last month is as follows:

 

Total

Per Unit

Sales revenue

$765,000

$51

Variable expenses

306,000

20.40

Contribution margin

459,000

$30.60

Fixed expenses

312,000

 

Operating income

$147,000

 

Required -

(a) What is Crane's contribution margin ratio? Its variable cost ratio?

(b1) Compute breakeven sales.

(b2) What is Crane's margin of safety?

(c) If Crane's sales were to increase by $100,000 with no change in fixed expenses, by how much would operating income increase?

(d) Crane's managers have determined that variable costs per unit will increase by 20% beginning next month. To offset this increase in costs, they are considering a 10% increase in the sales price. Market research indicates that the price increase will result in a 2% decrease in the number of learning systems Crane sells. What will be Crane's expected operating income if the price increase is implemented?

Reference no: EM133074633

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