Heely Company manufactures a product that sells for $50 per unit. Heely incurs a variable cost per unit of $35 and $2,400,000 in total fixed costs to produce this product. They are currently selling 200,000 units.
Instructions: Using the above data compute A - G
Compute the contribution margin per unit and contribution margin ratio. (CM/unit = $15; CM ratio = 30%)
Compute the break-even point in units. (160,000 units)
Compute the break-even point in dollars. ($8,000,000)
Compute the margin of safety and margin of safety ratio. (M of S = $2,000,000; Ratio = 20%)
Compute the number of units that must be sold in order to generate net income of $300,000 using the contribution margin per unit.( 180,000 units)
Should Heely give a commission to its salesmen based on 10% of sales, if it will decrease fixed costs by $400,000 and increase sales volume by 20%? Support your answer with labeled computations. (NO; Net income would go from $600,000 to $400,000)
What if Heely increases its selling price by 10%. How many units need to be sold to keep the same net income? (150,000 units)