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: $

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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: _____%