Questions -
Q1) Stand Todd Inc want to manufacture a new cell phone that can be worn on the wrist. Information from dong market research shows that he can sell this phone for 25$ each.
His fixed cost would be 145, 000$ for a year and variable cost would amount 10$ per phone.
1. What would the Contribution margin ratio be?
2. What sales volume in units would Stand need to break even?
3. What sales volume in units would Stand need to earn 200, 000$ profit?
4. What would be the margin of safety if he sold 25, 000$ units?
Q2) Spotless Inc, sells only one product. The sales price per unit is 55$, with variable cost per unit of 45$. Fixed costs are 62, 000$ per month. Maximum capacity is 36, 000 units per month.
1. To break even, how many units must Spotless sell per month?
2. If Spotless Inc, sold 27, 000 units, what would be its operating income for the month?
3. At present capacity, what is the maximum operating income Spotless, can expect to earn per month?
4. Assuming that direct labor cost can be reduced by 2$ per unit, what would the maximum operating income be per month?