EXERCISE 6-19

1. = (70 x 15,000) – (15,000 x 4) - 540,000

= 1,050,000 - 600,000 - 540,000
= (90,000)
2. Breakeven point in sales = 540,000
30
= 18,000 units
In dollar sales = 18,000 x 70 per unit
= 1,740,000
3.

Unit Selling Unit Variable Unit CM Volume Total CM Fixed Exp Net operating
Price exp (units) income
58 40 18 45,000 810,000 540,000 270,000
4. Breakeven point in sales = 540,000
18 This is different from the breakeven point in
= 30,000 units number 2 because there is a change in the
30,000 x 58 per unit = 1,740,000 selling price. From 30 to 18.

EXERCISE 6-20
1. 6.
a. = 210,000 a. = 90,000 + 420,000
10 16
= 21,000 balls = 31,875 balls
b. = 300,000 b. Contribution Income Statement
90,000 Sales (30,000 balls x 25) 750,000
= 3.33 Variable Expenses (30,000 balls x 9) 270,000
2. = 210,000 Contribution Margin 480,000
7 Fixed Expenses 420,000
= 30,000 balls Net Operating Income 60,000
3. = 90,000 + 210,000
7 Degree of Operating leverage = 480,000
= 42,857 balls 60,000
4. P = 18 + .40P =8
.60P = 18 c. I’m in favor of constructing the new plant because
P = 18 / .60 innovations will lead to higher productivity.
P = 30
5. = 420,000
16
= 26,250 balls
EXERCISE 6-22
1. In unit sales = 180,000
9
= 200,000 units
In dollar sales = 180,000
.30
= 600,000 units
2. 80,000 x 30% = 24,000
- 16,000
8,000 increase
3. Sales (39,000 units x 27) 1,053,000
Variable Expenses (39,000 units x 21) 819,000
Contribution Margin 234,000
Fixed Expenses (180,000 + 60,000) 240,000
Net Operating Loss (6,000)
4. = 9,750 + 180,000
8.25
= 23,000 units
5.
a. In unit sales = 180,000 + 72,000
12
= 21,000 units
In dollar sales = 180,000 + 72,000
.40
= 630,000 units
b.

NOT AUTOMATED AUTOMATED

Total Per % Total Per %
Sales (26,000 units) 780,000 30 100 780,000 30 100
Variable Expenses 546,000 21 70 468,000 18 60
Contribution Margin 234,000 9 30 312,000 12 40
Fixed Expenses 180,000 252,000
Net operating income 54,000 60,000
c. It depends on the company whether to automate its operations or not. If they are
willing to take risks then they should automate it.
EXERCISE 6-24

1. Selling price 13.50

Variable Expenses (8 + 1.50) 9.50
Contribution Margin 4

= 1,200
4
= 300 sweatshirts
300 sweatshirts x 13.50 = 4,050 in total sales

2. Selling price 13.50

Variable Expenses 1.50
Contribution Margin 12

= 600
12
= 50 sweatshirts
50 sweatshirts x 13.50 = 675 in total sales