Requirement 1: What will the operating profit be? (Omit the "$" sign in your response.

) Operating profit

$ 36,000

Requirement 2: (a) What is the impact on operating profit if the sales price decreases by 10 percent? (Do not round intermediate calculations. Omit the "$" sign in your response.)

Operating profit decreases

by

$ 12,600

(b) What is the impact on operating profit if the sales price increases by 20 percent? (Do not round intermediate calculations. Omit the "$" sign in your response.)

Operating profit increases

by

$ 25,200

Requirement 3: (a) What is the impact on operating profit if variable costs per unit decrease by 10 percent? (Omit the "$" sign in your response.)

Operating profit increases

by

$ 7,000

(b) What is the impact on operating profit if variable costs per unit increase by 20 percent? (Omit the "$" sign in your response.)

Operating profit decreases

by

$ 14,000

Requirement 4: Suppose that fixed costs for the month are 10 percent lower than projected, and variable costs per unit are 10 percent higher than projected. What impact will these cost changes have on operating profit for the month? Will profit go up? Down? By how much? (Omit the "$" sign in your response.)

Operating profit decreases

rev: 02-26-2011
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by

$ 5,000

Required: (a) At what sales revenue per month does the company break even? (Round the weighted average contribution margin percentage to 4 decimal places. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

Break-even revenue

119,900

(b) Suppose the company is subject to a 35 percent tax rate on income. At what sales revenue per month will the company earn $40,950 after taxes assuming the same sales mix? (Round the weighted average contribution margin percentage to 4 decimal places. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

Sales revenue

283,400

Explanation: (a)

Compute weighted-average contribution margins for each product. Selling price per Weights case .40 $ 3 .35 .25 5 10 Variable Contribution Cost per Margin per Case Case $2 $1 3 6 2 4

Variety 1 Variety 2 Variety 3

Weighted-average = Revenue = Weighted-average CM = = Weighted-average CM% = Compute break-even revenue:

.4 $3 + .35 $5 + .25 $10 $5.45 .4 $1 + .35 $2 + .25 $4 $2.10 $2.10 $5.45 = 38.5321% (rounded)

Break-even revenue = F Weighted average CM% = $46,200 38.5321% = $119,900 (rounded)

(b)

After-tax income: = Before-tax income = = =

$40,950 [$40,950 (1 .35)] ($40,950 .65) $63,000

Compute required revenue: Revenue = = = = (F + Required profit) Weighted average CM% ($46,200 + $63,000) 38.5321% $109,200 38.5321% $283,400 (rounded)

2012 The McG