Matthew Inc. 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 (15,000 units at $25 per unit) $375,000 Variable expenses 300,000 Contribution margin (CM) 75,000 Fixed expenses 100,000 Net operating loss $ (25,000) 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 $0.50 per unit. Assuming no other changes, how many units would have to be sold each month to earn a pretax profit of $10,000?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

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Matthew Inc. 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 (15,000 units at $25 per unit) $375,000

Variable expenses 300,000

Contribution margin (CM) 75,000

Fixed expenses 100,000

Net operating loss $ (25,000)

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 $0.50 per unit. Assuming no other changes, how many units would have to be sold each month to earn a pretax profit of $10,000?

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