Oslo Company prepared the following contribution format income statement based o

Question

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Required (Answer each question independently and always refer to the original data unless instructed otherwise.) % per unit $ Units sold Sales $20,000.00 100% $20.00 1000 Variable expenses $12,000.00 60% $12.00 Contribution Margin $8,000.00 40% $8.00 Fixed Expenses $6,000.00 Net operating income $2,000.00 11.What is the margin of safety in dollars? What is the margin of safety percentage? 12.What us tge degree of operating leverage? 13.Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in sales? 14.Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $6,000 and the total fixed expenses are $12,000. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage? 15.Using the degree of operating leverage that you computed in the previous question, what is the estimated percent increase in net operating income of a 5% increase in sales?

Explanation / Answer

% per unit $ Units sold Sales $ 20,000.00 100% $      20.00 1000 Variable expenses $ 12,000.00 60% $      12.00 Contribution Margin $    8,000.00 40% $        8.00 Fixed Expenses $    6,000.00 Net operating income $    2,000.00 1. Total contribution margin   Total units sold units Contribution margin per unit per unit

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