Purchase Solution

Managerial Accounting : Contribution Margins, Break-even Point and Net Operating Income

Not what you're looking for?

Ask Custom Question

Baker Company has a product that sells for $20 per unit. The variable expenses are $12 per unit, and fixed expenses total $30,000 per year.

Required:

a. What is the total contribution margin at the break-even point?

b. What is the contribution margin ratio for the product?

c. If total sales increase by $20,000 and fixed expenses remain unchanged, by how much would net operating income be expected to increase?

d. The marketing manager wants to increase advertising by $6,000 per year. How many additional units would have to be sold to increase overall net operating income by $2,000?

Purchase this Solution
Solution Summary

Contribution Margins, Break-even Point and Net Operating Income are investigated.

Solution Preview

Required:
a. What is the total contribution margin at the break-even point?
Contribution Margin per unit= $20-12=$8 per unit (Selling price per unit-Variable cost per unit)

Fixed Expenses =$30000

Break even units= Fixed costs/Contribution Margin per unit= 30000/8= 3750 units
Thus break even units = 3750 units and ...

Purchase this Solution
Free BrainMass Quizzes
Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

View More Free Quizzes
Related BrainMass Solutions

  • Calculating sales for the Honeyville Company

    39099 Managerial Accounting #8 The contribution margin ratio is 30% for the Honeyville Company and the break-even point in sales is $150,000.

  • Multiple choice

    The contribution margin per unit = 131,100/5,700=$23 At 5,300 units Net operating income = 5,300X23-106,500 = $15,400 The solution explains two multiple choice questions relating to break-even point and net operating income

  • Operating & Financial Leverage

    38523 Break-even point: Differences between Operating & Financial Leverage 1. How can sales-mix changes impact a company's break-even point? And what other techniques can be used to effect BE? 2.

  • Managerial Accounting.

    606676 Managerial accounting Hallstead Jewelers Managerial Accounting Summary of Hallstead Jewelers Hallstead Jewelers was established in 1924 in the largest city in the tri-state region.

  • Managerial Accounting: Break-Even Point

    Thanks The expert examines the break-even point for managerial accounting.

  • Managerial Accounting Question

    This solution is comprised of a detailed explanation to calculate the break-even sales for the month and the margin of safety in sales dollars.

  • Managerial Accounting Problems for Cosgrove, Perrson, Iron Decor

    What is the per unit contribution margin for each of the two models? b. What is the break-even point in terms of sales dollars if the sales mix remains constant? c.

  • Ackee Food Center

    348436 Managerial accounting: contribution margin ratio; break-even point in dollar sales Presented below is the income statement for Ackee Food Center for the month of July: Based on an analysis of cost behavior patterns, it has been determined

  • Accounting: Breaking Even

    596062 Accounting: Breaking Even 1. Group your fixed and variable costs 2. Calculate your break-even point in monthly sales 3. Determine your monthly sales needed to have a contribution margin of $10,000 4.

View More Related Solutions