# Managerial Accounting Essay

400 Words2 Pages
Managerial Accounting 1B (Power Time and Haltom Business Case Study) A Powertime, Inc., produces and sells electric lawn mowers for \$250 each. The variable costs of each mower total \$160 while total monthly fixed costs are \$22,500. Current monthly sales are \$100,000. The company is considering a proposal that will increase the selling price by 10%, increase total fixed costs by 10% and increase unit sales to 500 units per month. Sales units Sales Selling price: \$250 100,000 400 Selling price: \$250(0.1)= \$275 137500 Variable cost: \$160 variable cost: \$160 Fixed cost: 22500 Fixed cost: 22,500(0.1)= 24750 1. Compute the company’s current break-even point in units and dollars? Break even Units: Fixed expense/CMUnit 22500/90 = 250 CM: 250-160= 90 Dollars: Fixed expense/ Cm ratio 22500/.36= \$62500 CM Ratio: units 90/ \$250 selling price = .36 2. What is the company’s current margin of safety in Units, dollars and percentage? Margin of Safety (DOLLARS) Budgeted – break even = 100,000-62500= 37500 (Percentage) 37.500/100.000= 37.5% (Units) 37500/250= 150 3.Compute the company’s margin of safety in units assuming the proposal is accepted. Margin of Safety (Dollars) 137500-58929= 78571 (Units) 78571/275= 286 4. Compute the increase or decrease in profit assuming the proposal is accepted, show the contribution Income Statement for current and proposed. Present Proposed Sales 100,000 137500 Variable expense 64000 80000 CM 36000 57500 Fixed cost 22500 244750 Net income 13500 32750 difference: 19250 4a. What is the operating leverage for the current and proposed? Operating Leverage CM/ Net Operating Income Current: