Reference no: EM131799799

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

	Total	Per Unit	Percent of Sales
Sales (25,000 units)	1,250,000	50	100%
Variable expenses	750,000	30	? %
Contribution margin	500,000	20	? %
Fixed expenses	400,000
Net operating income	100,000

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 $250,000?

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?

You should use an Excel spreadsheet for your answers.