Question: MathTot sells a learning system that helps
MathTot sells a learning system that helps preschool and elementary students learn basic math facts and concepts. The company’s income statement from last month is as follows: 
Required: a. What is MathTot’s contribution margin ratio? Its variable cost ratio? b. What is MathTot’s margin of safety? c. If MathTot’s sales were to increase by $100,000 with no change in fi xed expenses, by how much would operating income increase? d. MathTot’s managers have determined that variable costs per unit will increase by 16% beginning next month. To offset this increase in costs, they are considering a 10% increase in the sales price. Market research indicates that the price increase will result in a 2% decrease in the number of learning systems MathTot sells. What will be MathTot’s expected operating income if the price increase is implemented?
Transcribed Image Text:
Total Per Unit $600,000 210,000 Sales revenue $50.00 Variable expenses 17.50 Contribution margin Fixed expenses $32.50 390,000 292,500 Operating income $ 97,500
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