Reference no: EM133042274

Problem - Ventana Inc. sells a single product for $47. Its management estimates the following revenues and costs for the year 2020:

Net Sales	$625,000	Selling expenses - Variable	$18,000
Direct Materials	82,000	Selling expenses - Fixed	21,800
Direct Labour	76,000	Admin expenses - Variable	3,400
Mfg Overhead - Variable	34,000	Admin expenses - Fixed	2,500
Mfg Overhead - Fixed	26,000

Required -

1. Assuming fixed costs and net sales are spread evenly throughout the year, determine Ventana's monthly break-even point in (a) units and (b) dollars.

2. Calculate the contribution margin ratio, the annual margin of safety ratio, and the annual profit.

3. Determine the percentage increase of annual profits if Ventana Inc. increases its selling price by 25% and all other factors (including demand) remain constant.

4. Assume the price remains at $47 per unit and variable costs remain the same per unit, but fixed costs increase by 14% annually. Calculate the percentage increase in unit sales required to achieve the same level of annual profit calculated in required # 2.

5. Determine the sales required to earn an operating income of $370,000 after tax. Ventana lnc.'s income tax is 25%.