Reference no: EM133030492
Question - Lux Corp. manufactures and sells a single product. Over the past year the company sold 500 units, with the following operating results.
Total Per unit
Sales (500) $100,000 $200
Less variable expenses 75,000 150
Contribution margin $25,000 $50
Less fixed expenses 17,000
Net income $8,000
(1) Compute: (a) the CM ratio; (b) the break-even point in units; (c) the break-even point in $ sales; and (d) the margin of safety
(2) How many units must be sold to earn a minimum target net income of $15,000?
(3) Due to an increase in the cost of direct materials, the company estimates that variable costs will increase by $5 per unit next year. If this change takes place and the selling price per unit remains constant at $200, what will be the (a) new CM ratio and (b) the new break-even point in number of units?
(4) Refer to the original data. The company is considering the construction of a new, automated plant. The new plant would slash variable costs per unit by 40%, but it would cause fixed costs to increase by 80%. If the new plant is built, what would be the company's new break-even point in number of units?