Ozark Metal Company makes a single product that sells for $45.5 per unit. Variable costs are $29.1 per unit, and fixed costs total $65,355 per month. Required: a. Calculate the number of units that must be sold each month for the firm to break even. b. Assume current sales are $414,000. Calculate the margin of safety and the margin of safety ratio. c. Calculate operating income if 5,300 units are sold in a month.
Ozark Metal Company makes a single product that sells for $45.5 per unit. Variable costs are $29.1 per unit, and fixed costs total $65,355 per month. Required: a. Calculate the number of units that must be sold each month for the firm to break even. b. Assume current sales are $414,000. Calculate the margin of safety and the margin of safety ratio. c. Calculate operating income if 5,300 units are sold in a month.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ozark Metal Company makes a single product that sells for $45.5 per unit. Variable costs are $29.1 per unit, and fixed
costs total $65,355 per month.
Required:
a. Calculate the number of units that must be sold each month for the firm to break even.
b. Assume current sales are $414,000. Calculate the margin of safety and the margin of safety ratio.
c. Calculate operating income if 5,300 units are sold in a month.
d. Calculate operating income if the selling price is raised to $48.5 per unit, advertising expenditures are increased by
$10,000 per month, and monthly unit sales volume becomes 6,000 units.
e. Assume that the firm adds another product to its product line and that the new product sells for $22 per unit, has
variable costs of $16 per unit, and causes fixed expenses in total to increase to $87,000 per month. Calculate the firm's
operating income if 5,300 units of the original product and 4,200 units of the new product are sold each month. For the
original product, use the selling price and variable cost data given in the problem statement.
f. Calculate the firm's operating income if 3,200 units of the original product and 6,300 units of the new product are sold
each month.
g. Why operating income is different in parts e and f, even though sales totaled 9,500 units in each case.
Complete this question by entering your answers in the tabs below.
Required A Required B Required C
Required D
Required E
Required F Required G
Calculate operating income if the selling price is raised to $48.5 per unit, advertising expenditures are increased by $10,000
per month, and monthly unit sales volume becomes 6,000 units.
Note: Do not round intermediate calculations.
Operating income
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