Reference no: EM132755552
Question - LAMBTON LTD. has prepared the following Contribution Format Statement of Income for 2019:
Per Unit Total Revenue
Revenue $20 $2,000,000
Variable Costs $12 1,200,000
Contribution Margin 800,000
Fixed Costs (includes depreciation of $80,000) 650,000
Profit for the year $150,000
Additional Information: Volume of output (production and sales) for 2019 was 100,000 units.
Required - Answer the following INDEPENDENT questions and show all calculations to support your answers: NOTE: Round all "dollar" amounts to the nearest whole dollar (ie. no decimal places), and all other calculated amounts to 2 decimal places.
1) How many units would the company have to sell in order to reach the cash break-even point for 2019?
2) Compute the regular break-even point stated in terms of revenue dollars for 2019. (Note: Do not calculate the break-even point in units).
3) Management is planning for an improvement in profitability for 2020, they would like to earn a total profit of $200,000 in 2020. However, it is expected that due to rising materials costs in 2020, the cost of each unit produced will increase by $3. It is also expected that company salaries cost will be reduced by $75,000 in 2020. In light of these changes, if selling prices remain unchanged, how many units must be sold in order for LAMBTON LTD. to earn its desired profit level for 2020?
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