Morton Companys contribution format income statement for last month is given below: ...
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Accounting
Morton Companys contribution format income statement for last month is given below:
Sales (43,000 units $27 per unit)
$
1,161,000
Variable expenses
812,700
Contribution margin
348,300
Fixed expenses
278,640
Net operating income
$
69,660
The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.
4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the companys marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach would increase unit sales by 30% without any change in selling price; the companys new monthly fixed expenses would be $520,128; and its net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy.
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