Graham's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $620,000 and a contribution margin of 80% of revenues. Graham feels like he's in a giant squeeze play. The automotive manufacturers are demanding lower prices, and the steel producers have increased raw material costs. Graham's contribution margin has shrunk to 60% of revenues. The company's monthly operating income, prior to these pressures, was $196,000. Read the requirements Requirement 1. To maintain this same level of profit, what sales volume (in sales revenue) must Graham now achieve? Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach Target sales in dollars Requirements - X 1.To maintain this same level of profit, what sales volume (in sales revenue) must Graham now achieve? 2.Graham believes that his monthly sales revenue will only go as high as $1,020,000. He is thinking about moving operations overseas to cut fixed costs If monthly sales are $1,020,000, by how much will he need to cut fixed costs to maintain his prior profit level of $106,000 per month?
Graham's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $620,000 and a contribution margin of 80% of revenues. Graham feels like he's in a giant squeeze play. The automotive manufacturers are demanding lower prices, and the steel producers have increased raw material costs. Graham's contribution margin has shrunk to 60% of revenues. The company's monthly operating income, prior to these pressures, was $196,000. Read the requirements Requirement 1. To maintain this same level of profit, what sales volume (in sales revenue) must Graham now achieve? Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach Target sales in dollars Requirements - X 1.To maintain this same level of profit, what sales volume (in sales revenue) must Graham now achieve? 2.Graham believes that his monthly sales revenue will only go as high as $1,020,000. He is thinking about moving operations overseas to cut fixed costs If monthly sales are $1,020,000, by how much will he need to cut fixed costs to maintain his prior profit level of $106,000 per month?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Graham's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $620,000 and a contribution margin of 80% of revenues. Graham feels like he's in a
giant squeeze play. The automotive manufacturers are demanding lower prices, and the steel producers have increased raw material costs. Graham's contribution margin has shrunk to 60% of
revenues. The company's monthly operating income, prior to these pressures, was $196,000.
Read the requirements
Requirement 1. To maintain this same level of profit, what sales volume (in sales revenue) must Graham now achieve?
Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach
Target sales in dollars
- X
Requirements
1.To maintain this same level of profit, what sales volume (in sales revenue) must
Graham now achieve?
2.Graham believes that his monthly sales revenue will only go as high as
$1,020,000. He is thinking about moving operations overseas to cut fixed costs
If monthly sales are $1,020,000, by how much will he need to cut fixed costs to
maintain his prior profit level of $196,000 per month?
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