Wendle Corp. produces memory enhancement kits for DVR machines. Sales have been very erratic, with some months showing a loss. The company's contribution format income statement for the most recent month is given below: Sales (30,000 units at $20 per unit) $600,000 Variable expenses 300,000 Contribution margin (CM) 300,000 Fixed expenses 400,000 Net operating loss $ (10,000) Required: Compute the company's break-even point in both units and dollars. The sales manager feels that a $60,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $400,000 increase in monthly sales. If the sales manager is right, what will be the effect on the company's monthly net operating income or loss? Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $120,000 in the monthly advertising budget, will cause unit sales to double. What will the new contribution format income statement look like if these changes are adopted? Refer to the original data. The company's advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $1.00 per unit. Assuming no other changes, how many units would have to be sold each month to earn an after-tax profit of $25,000? Wendle’s tax rate is 25 percent.

Wendle Corp. produces memory enhancement kits for DVR machines. Sales have been very erratic, with some months showing a loss. The company's contribution format income statement for the most recent month is given below: Sales (30,000 units at $20 per unit) $600,000 Variable expenses 300,000 Contribution margin (CM) 300,000 Fixed expenses 400,000 Net operating loss $ (10,000) Required: Compute the company's break-even point in both units and dollars. The sales manager feels that a $60,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $400,000 increase in monthly sales. If the sales manager is right, what will be the effect on the company's monthly net operating income or loss? Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $120,000 in the monthly advertising budget, will cause unit sales to double. What will the new contribution format income statement look like if these changes are adopted? Refer to the original data. The company's advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $1.00 per unit. Assuming no other changes, how many units would have to be sold each month to earn an after-tax profit of $25,000? Wendle’s tax rate is 25 percent.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Sales (30,000 units at $20 per unit) $600,000

Variable expenses 300,000

Contribution margin (CM) 300,000

Fixed expenses 400,000

Net operating loss $ (10,000)

Required:

Compute the company's break-even point in both units and dollars.
The sales manager feels that a $60,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $400,000 increase in monthly sales. If the sales manager is right, what will be the effect on the company's monthly net operating income or loss?
Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $120,000 in the monthly advertising budget, will cause unit sales to double. What will the new contribution format income statement look like if these changes are adopted?
Refer to the original data. The company's advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $1.00 per unit. Assuming no other changes, how many units would have to be sold each month to earn an after-tax profit of $25,000? Wendle’s tax rate is 25 percent.

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