Management accounting

Management Accounting
Individual Assignment
Please show your work in answering all the questions below:
1)
Basic Given:
Volume
Price
Variable expense
Fixed expenses:
5000 units /month,
SR 50/ unit
SR 30/unit
SR 80,000 / month
What is the profit impact if management cuts its price by SR4 per unit, increases its monthly
advertising budget by SR11,000, and increases sales volume from 5000 to 6500 units per
month?
2)
Racing Bicycle Company
Contribution Income Statement
For the Month of June
Sales (500 bicycles)
$
250,000
Less: Variable expenses
150,000
Contribution margin
100,000
Less: Fixed expenses
80,000
Net operating income
$
20,000
a) What is RBC’s Contribution Margin (CM) per unit?
b) What is RBC’s CM Ratio?
c) What is RBC’s Break-even point in Units?
d) What is RBC’s Break-even point in Dollars?
e) What would RBC’s Net Operating Income be if they sell 430 bicycles?
f) What is the profit impact if RBC can increase unit sales from 500 to 540 by increasing
the monthly advertising budget by $10,000?
g) What is the profit impact if RBC can use higher quality raw materials, thus increasing
variable costs per unit by $10, to generate an increase in unit sales from 500 to 580?
Dr. Tarek El Masri, MBSC, MiM 507 Accounting
h) What is the profit impact if RBC cuts its selling price $20 per unit, increases its
advertising budget by $15,000 per month, and increases sales from 500 to 650 units per
month?
i) What is the profit impact if RBC pays a $15 sales commission per bike sold instead of
paying salespersons flat salaries that currently total $6,000 per month, and increases
unit sales from 500 to 575 bikes?
j) If RBC has an opportunity to sell 150 bikes to a wholesaler without disturbing sales to
other customers or fixed expenses, what price would it quote to the wholesaler if it
wants to increase profits by $3,000?
k) I can go on forever, but I guess this is enough. Thank you for working this far ☺
Dr. Tarek El Masri, MBSC, MiM 507 Accounting