Reference no: EM132534169

Pennell Company gathered the following information for the year ended December 31, 2008:

Fixed costs:

Manufacturing $180,000

Marketing 55,000

Administrative 25,000

Variable costs:

Manufacturing $112,500

Marketing 37,500

Administrative 45,000

• During the year, Pennell produced and sold 75,000 units of product at a sale price of $6.60 per unit. There was no beginning inventory of product on January 1, 2008.

Required:

Question a) Prepare Contribution Margin Income Statement.

Question b) Compute BEP (in units and TL)

Question c) Compute Operating Leverage

Question d) Compute Safety Margin

Question e) Compute the amount that must be sold to increase operating income (net income) 100 %.

Question f) Marketing manager believes there will be 10% increase in sales if Company decreases price by 10%. Should price be decreased? Explain.

Question g) If Company decreases price by 10%, how many units must be sold to maintain current profit?