Last month when Holiday Creations, Inc., sold 50,000 units, total sales were $200,000, total variableexpenses were $120,000, and fixed expenses were $65,000.Required:1. What is the company’s contribution margin (CM) ratio?2. Estimate the change in the company’s net operating income if it were to increase its total sales by$1,000.

Last month when Holiday Creations, Inc., sold 50,000 units, total sales were $200,000, total variableexpenses were $120,000, and fixed expenses were $65,000.Required:1. What is the company’s contribution margin (CM) ratio?2. Estimate the change in the company’s net operating income if it were to increase its total sales by$1,000.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 47E: Klamath Company produces a single product. The projected income statement for the coming year is as...

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Klamath Company produces a single product. The projected income statement for the coming year is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. 2. Suppose 10,000 units are sold above break-even. What is the operating income? 3. Compute the contribution margin ratio. Use the contribution margin ratio to compute the break-even point in sales revenue. (Note: Round the contribution margin ratio to four decimal places, and round the sales revenue to the nearest dollar.) Suppose that revenues are 200,000 more than expected for the coming year. What would the total operating income be?
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