Data concerning Lemelin Corporation's single product appear below:Selling priceVariable expensesContribution marginPer Unit$ 230115$ 115Percent ofSales100%50%50%The company is currently selling 7,000 units per month. Fixed expenses are $581,000 per month.The marketing manager would like to cut the selling price by $18 and increase the advertising budget by $37,000 per month. The marketing managerpredicts that these two changes would increase monthly sales by 1,600 units. What should be the overall effect on the company's monthly net operatingincome of this change? Oincrease of $118,200decrease of $118,200increase of $302,200decrease of $7,800

Particulars Current Proposed Sales (230*7000)=$1,610,000 212*(7000+1600)=$1,823,200 Variable…

Answered: Data concerning Lemelin Corporation's…

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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Matikas Division of Shortcuts Company expects the following results for 2007:Unit sales 70,000Unit selling price P 10Unit variable cost P 4Total fixed costs P300,000Total investment P500,000The minimum required ROI is 15 percent, and divisions are evaluated on residual income. A foreign customer has approached Matikas' manager with an offer to buy 10,000 units at P7 each. If Matikas accepts the order, it would not lose any of the 70,000 units at the regular price. Accepting the order would increase fixed costs by P10,000 and investment by P40,000.What is the minimum price that Matikas could accept for the order and still maintain its expected residual income?
Whitewater Inc sells a product that has variable costs of $40 and a selling price of $95. Its current sales total $304,000 per month. Fixed manufacturing costs total $40,000 per month and fixed selling and administrative costs total $35,000 per month. The company is considering a proposal that will increase the selling price by 10%, increase the fixed manufacturing costs by 10%, and increase the fixed selling and administrative costs by $1,500. Part 1: Compute the company's current break-even point in units. Part 2: Compute the company's current income and the current margin of safety. Part 3: Compute the new contribution margin per unit assuming the proposal is accepted. Part 4: Compute the new break-even point in units assuming the proposal is accepted. Part 5: Compute the company's income assuming the proposal is accepted and sales total 3,300 units. Part 6: Should the proposal be accepted?
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7. A company believes that if it spends $30,000 on an advertising campaign for one of its segments, there will be a 20% increment in the segment's sales. The contribution margin for the segment is 60% of sales. Sales for the segment are expected to be $400,000 before the advertising campaign. The relationship of costs to sales is expected to remain the same. The incremental net operating income if the advertising campaign is undertaken is expected to be: a. $48,000 b. $38,000 c. $18,000 d. $ 8,000 e. None of the above. The answer is Answer
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Currently, OET Corporation sells 350,000 units of widgets a month at a price of $ 21 a unit. The company currently has a net 30 credit policy. Mr. Ent, the company's financial manager, is evaluating a new credit policy of net 60 for the company. The marketing manager thinks that sales would increase by 10,000 units per month if the company were to switch to the new credit policy. The APR for OET is 13% compounded monthly, and its variable cost per widget is $12. Ignore taxes. Tomorrow, Mr. Ent will be making a presentation on the new proposed credit policy to the CEO of OET. He will be expected to provide answers to the following questions. The net present value of the proposed credit policy switch is O a. $837,692.31 O b. 5437.295.90 O c. $783,926.13 O d. $592,032.32 O e. $639,284.55

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