Response to the following problem:
Zaldor Corporation sells a specialized speaker and has the following information for the current year:
Total Per unit Percent of sales
Sales (25,000 units) 1,250,000 50 100%
Variable expenses 750,000 30 ?%
Contribution margin 500,000 20 ?%
Fixed expenses 400,000
Net operating income 100,000
Required:
Calculate the variable expense ratio
Calculate the contribution margin ratio
Calculate break even sales in units
Calculate break even sales in dollars
How many units must be sold to make a profit of $250,000?
Management is considering increasing the quality of its units by spending $3 more per unit in variable costs and adding a quality inspector for an additional $40,000 annual fixed cost. Management believes this change will increase unit sales by 20% at the same price.
Calculate the new profit or loss if the changes are implemented.
Would you recommend management make the changes? Why or why not?
You should use an Excel spreadsheet for your answers.