Module 04: Critical Thinking – ACT 500

Complete the following questions using Microsoft Word or Excel, as appropriate. Review the grading rubric to confirm you are meeting the assignment requirements.

Zaldor Corporation sells a specialized speaker and has the following information for the current year:

Per

Percent

Total

Unit

of Sales

Sales (20,000 units)

1,200,000

60

100%

Variable expenses

800,000

40

? %

Contribution margin

400,000

20

? %

Fixed expenses

250,000

Net operating income

150,000

Required:

  1. Calculate the variable expense ratio
  2. Calculate the contribution margin ratio
  3. Calculate break even sales in units
  4. Calculate break even sales in dollars
  5. How many units must be sold to make a profit of $300,000?

Management is considering increasing the quality of its units by spending $3 more per unit in variable costs and adding a quality inspector for an additional $40,000 annual fixed cost. Management believes this change will increase unit sales by 20% at the same price.

  1. Calculate the new profit or loss if the changes are implemented.
  2. Would you recommend management make the changes? Why or why not?

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