Not secure l ezto.mheducation.com/hm.tpx?--046968666807183657-15378 12804934 The

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Not secure l ezto.mheducation.com/hm.tpx?--046968666807183657-15378 12804934 The Chapter 5 Form worksheet is to be used to create your own worksheet version of the example in the text on pages 212-214 value 33.33 points 2. Change all of the numbers in the data area of your worksheet so that it looks like this 1 Chapter 5: Applying Excel 3 Data 4 Unit sales 5 Seling price per unit 6 Variable expenses per unit 7 Fixed expenses 40,000 units $10 per unit $6 per unit $120,000 If your formulas are correct, you should get the correct answers to the following questions (a) What is the break-even in dollar sales? (b) What is the margin of safety percentage? (c) What is the degree of operating leverage? (Round your answer to 2 decimal places.) gree of operating leverage

Explanation / Answer

a)

Contribution margin per unit = Selling price per unit – Variable expenses per unit = $10 - $6 = $4 per unit

Contribution margin ratio = Contribution margin per unit/Selling price per unit = $4 / $10 = 40%

Break even in dollar sales = Fixed expenses / Contribution margin ratio = $120,000/ 40% = $300,000

b)

Total sales = 40,000 units * $10 per unit = $400,000

Margin of safety sales = Total sales – Break even sales = $400,000 - $300,000 = $100,000

Margin of safety percentage = Margin of safety sales / Total sales = $100,000/$400,000 = 0.25 = 25%

c)

Contribution margin = Contribution margin per unit * Unit sales = $4 * 40,000 units = $160,000

Operating income = Contribution margin – Fixed expenses = $160,000 - $120,000 = $40,000

Degree of operating leverage = Contribution margin / Operating income = $160,000/$40,000 = 4 times

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