Figure 4-6. Shorter Company had originally expected to earn operating income of
ID: 2342580 • Letter: F
Question
Figure 4-6.
Shorter Company had originally expected to earn operating income of $130,000 in the coming year. Shorter's degree of operating leverage is 2.4. Recently, Shorter revised its plans and now expects to increase sales by 20% next year.
7. Refer to Figure 4-6. What is the percent change in operating income expected by Shorter in the coming year?
a.
8.33%
b.
48.0%
c.
20.0%
d.
54.17%
e.
30.0%
8. Refer to Figure 4-6. What is Shorter's revised expected operating income for the coming year?
a.
$192,400
b.
$156,000
c.
$312,000
d.
$130,000
e.
$62,400
9. Dance Unlimited plans to sell 10,000 ballet shoes at $50 each in the coming year. Unit variable cost is $30 and total fixed cost equals $65,000.
Required:
A.) Calculate the break-even in ballet shoes.
B.) Calculate the break-even in sales dollars.
10. Shamrock Inc. plans to sell 3,000 Irish sweaters for $200 each in the coming year. Product costs include:
Direct materials per sweater
$ 40
Direct labor per sweater
10
Variable overhead per sweater
15
Total fixed factory overhead
20,000
Variable selling expenses are $5 per sweater and fixed selling and administrative expenses total $12,000.
Required:
A.) Calculate the total variable cost per unit.
B.) Calculate the total fixed expenses for the year.
C.) Prepare a contribution margin income statement for Shamrock Inc. for the coming year.
Figure 4-6.
Shorter Company had originally expected to earn operating income of $130,000 in the coming year. Shorter's degree of operating leverage is 2.4. Recently, Shorter revised its plans and now expects to increase sales by 20% next year.
Explanation / Answer
Degree of Operating Income = % change in Operating Income/%change in sales 7 Percent change in operating income expected 48 % (2.4*0.2)*100 Answer - b. 48.0% 8 Revised operating Income 192400 (130000*1.48) Answer - a $192,400 9 Breakeven in ballet shoes 3250 shoes 65000/(50-30) Breakeven in sales dollar 162500 (3250*50)
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