Problem: Iron Decor manufactures decorative iron railings. In preparing for the next years operations, management has developed the following estimates:
Total Per Unit
Sales (20,000 units)…………………………1,000,000 50.00
Direct Materials………………………………… 200,000 10.00
Direct Labor(variable)……………………………50,000 2.50
Factory Overhead:
Variable…………………………………… 70,000 3.50
Fixed………………………………………… 80,000 4.00
Selling and administrative:
Variable……………………………………100,000 5.00
Fixed…………………………………………30,000 1.50
A) Compute the Unit Contribution Margin
B) Compute Contribution Margin Ratio
C) Compute Break-Even in sales dollars
D) If the sales volume increases by 20% with no change in total fixed expenses, what will be the change in net operating income?
E) If the per unit variable production cost increase by 15%, and if the fixed selling and administrative expenses increase by 12%, what will be the new break-even point in sales dollars?