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Homework answers / question archive / Monterey Co
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Monterey Co. makes and sells a single product. The current selling price is $16 per unit. Variable expenses are $9.6 per unit, and fixed expenses total $36,880 per month. (Unless otherwise stated, consider each requirement separately.) |
Exercise 1:
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Required: |
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a. |
Calculate the break-even point expressed in terms of total sales dollars and sales volume. (Do not round your intermediate calculations. Round your final answers to nearest whole number.) |
Exercise 2:
Monterey Co. makes and sells a single product. The current selling price is $16 per unit. Variable expenses are $9.6 per unit, and fixed expenses total $36,880 per month. (Unless otherwise stated, consider each requirement separately.)
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b. |
Calculate the margin of safety and the margin of safety ratio. Assume current sales are $108,208 (Do not round your intermediate calculations. Round your percentage answer to 2 decimal places.) |
Exercise 3:
Monterey Co. makes and sells a single product. The current selling price is $16 per unit. Variable expenses are $9.6 per unit, and fixed expenses total $36,880 per month. (Unless otherwise stated, consider each requirement separately.)
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c. |
Calculate the monthly operating income (or loss) at a sales volume of 5,450 units per month. (Do not round your intermediate calculations.) |
Exercise 4:
Monterey Co. makes and sells a single product. The current selling price is $16 per unit. Variable expenses are $9.6 per unit, and fixed expenses total $36,880 per month. (Unless otherwise stated, consider each requirement separately.)
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d. |
Calculate monthly operating income (or loss) if a $2 per unit reduction in selling price results in a volume increase to 8,100 units per month. (Do not round your intermediate calculations.) |
Exercise 5:
Monterey Co. makes and sells a single product. The current selling price is $16 per unit. Variable expenses are $9.6 per unit, and fixed expenses total $36,880 per month. (Unless otherwise stated, consider each requirement separately.)
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e. |
What questions would have to be answered about the cost-volume-profit analysis simplifying assumptions before adopting the price cut strategy of part d? (Select all that apply.) |
Does the increase in volume move fixed expenses into a new relevant range?
Are variable expenses really linear?
Exercise 6:
Monterey Co. makes and sells a single product. The current selling price is $16 per unit. Variable expenses are $9.6 per unit, and fixed expenses total $36,880 per month. (Unless otherwise stated, consider each requirement separately.)
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Exercise 7:
Monterey Co. makes and sells a single product. The current selling price is $16 per unit. Variable expenses are $9.6 per unit, and fixed expenses total $36,880 per month. (Unless otherwise stated, consider each requirement separately.) Management is considering a change in the sales force compensation plan. Currently each of the firm's two salespeople is paid a salary of $2,500 per month.
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g.2 |
Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.8 per unit, assuming a sales volume of 6,350 units per month. (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.) |
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h.1 |
Assuming that the sales volume of 6,350 units per month achieved in part g could also be achieved by increasing advertising by $1,000 per month instead of changing the sales force compensation plan. What would be the operating income or loss? (Do not round your intermediate calculations.) |
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h.2 |
Which strategy would you recommend? |
