Reference no: EM133109284
Question - Riley Company manufactures and sells automated door locks for upscale apartments in the city. The following information is given.
Sales (40,000 units) $2,400,000
Variable expenses $1,800,000
Fixed expenses $480,000
In an effort to increase the company's profits the management as ask for an analysis of the items below.
Required -
-Construct the company's contribution margin(CM) income statement and compute the CM ratio and variable expense ratio.
-Compute the company's break-even point in both units and sales dollars. Use the equation method.
-Assume sales increase by 5,000 units next year and cost patterns remained unchanged, how much will be the company's new net operating income.
-Based on the data given if management wants to earn a profit of $150,000, how many units must be sold to achieve this target.
-In an effort to increase sales and profit management has decided to use higher quality inputs. These inputs will increase variable costs by $3 per unit and, at the same time reduce labour by $30,000 per year. Consequently sales is estimated to increase by 20% annualy.
-Prepare a projected contribution format income statement for next year given the changes.
-Compute the company' new breakeven point in both dollars and sales.would you recommend that the changes be made?