Magic Manufacturing’s_CM_BEP

1. Magic Manufacturing’s sales
slumped badly in 2012. For the first time in its history, it operated at a
loss.

The company’s income statement showed the following results from
selling 600,000 units of product:
Net sales $2,400,000; total costs and expenses $2,525,800; and net loss
$125,800.

Costs and expenses consisted of the amounts shown below:

Total

Variable

Fixed

Cost
of Goods Sold

2,085,300

1,465,600

619,700

Selling
Expenses

243,500

74,200

169,300

Administrative
Expense

197,000

44,200

152,800

2,525,800

1,584,000

941,800

a) Compute the contribution margin
ration.

The Contribution Margin Ratio: _____%

b) Compute the break-even point in dollars for 2012.

The break-even point in dollars: $
—————————————————————————————————————————————–

2. Change the compensation
of salespersons from fixed annual salaries totaling $153,200 to total
salaries of $59,100 plus a 3% commission on net sales. Compute the
contribution margin ratio.

Total

Variable

Fixed

Cost
of Goods Sold

2,085,300

1,465,600

619,700

Selling
Expenses

243,500

146,200

16,100

Administrative
Expense

197,000

44,200

152,800

2,525,800

1,656,000

788,600

The Contribution Margin Ratio: _____%

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