Reference no: EM133093250

Question - HMI Inc. is suffering from effects of increased competition for its product, a lawn mower that is sold is discount stores. The following table shows the results of its operations for 2020:

Sales (12,500 units @ $84) $1,050,000

Variable Cost (12,500 units @ $63) 787,500

Contribution Margin 262,500

Fixed Costs 296,100

Operating Profit (Loss) ($33,600)

Required -

1. Compute the break - even point in both units and dollars.

2. Compute the Contribution Margin ratio at the 12,500 units.

3. What would be the required sales in units and dollars to generate a target profit of $30,000.

4. The manager believes that a $60,000 increase in advertising would result in a $200,000 increase in annual sales. If this change is implemented, what would be the new annual profit or loss.

5. A 10% reduction in price per unit and an increase in advertising of $40,000 would cause the sales in unit to increase by 25% - if this change is implemented what would be the new operating profit (loss).