Cost Behavior and Activity Based Costing (ABC)

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Complete the following questions using Microsoft Word or Excel, as appropriate. Review the grading rubric to confirm you are meeting the assignment requirements.

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

Total Per Unit Percent of Sales
Sales (20,000 units) 1,200,000 60 100%
Variable expenses 800,000 40 ? %
Contribution margin 400,000 20 ? %
Fixed expenses 250,000
Net operating income 150,000


  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 $300,000?

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?

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