The following data is available from a recent month for Vellic Company, which currently manufactures and sells only one product: Total
Sales (5,000 units)
240,000
Total Variable Expenses
180,000
Contribution Margin
60,000
Total Fixed Expenses
42.000
Net Income
18,000
Required: For each question below, be sure to show all of your work if you want partial credit. Also, be sure to properly label your answers.
1. Calculate the selling price per unit (2 pts)
2. Calculate the break-even point in units and sales dollars. (4 pts)
3. Calculate the margin of safety and the margin of safety percentage (3 pts)
4. Refer to the original information. Management is considering an advertising campaign that will cost $15,000 per month. The new
advertising is expected to increase monthly sales by 40%. If this change is made, how much is the expected monthly income? (3pts)
5. Refer to the original information Management is also considering the purchase of cheaper materials to use in the manufacture of its
product. The cheaper materials will reduce costs by $2 per unit. However, the cheaper materials will also have a negative impact on the
quality of the product, which in turn, is expected to decrease sales by 20%. If this change is made, how much is the expected monthly
income? (3pts)