E) If variable selling costs increase by $1 per unit, and if fixed selling and a

Question

E) If variable selling costs increase by $1 per unit, and if fixed selling and administrative expenses decrease by 10%, determine the new break-even point inunits (round to nearest whole unit.):

F)Calculate the company's degree of operating leverage.

PLEASE SHOW WORK, I WANT TO LEARN HOW TO DO THESE PROBLEMS. Thank you!

Problem One Replacement maximum 24 points The following is Arka Corporation's contribution format income statement for last month Total Per Unit $1,200,000 48 Sales Direct materials Direct labor (variabl). Manufacturing overhead 340,000 13.6 350,000 14 110,000 155,600 Fixed Selling & administrative $140,000 $96,756 5.6 Variable Fixed The company has no beginning or ending inventories, and produced and sold 25,000 units during the month. Required: Compute the following items-show your calculations:

Explanation / Answer

Statement showing computations Particulars Amount Sales =25,000 * 48    1,200,000.00 Variable Costs Direct Materials = 25,000*13.6        340,000.00 Direct Labour = 25,000*14        350,000.00 Variable Manu O/H = 25,000*4.4        110,000.00 Variable Selling and admin O/H = 25,000*6.6        165,000.00 Total Variable Costs        965,000.00 Contribution=Sales - VC        235,000.00 Fixed Costs Fixed Manu O/h        155,600.00 Fixed selling and admin O/h=96,756*0.90          87,080.40 Total Fixed Costs        242,680.40 Income = Contribtuion - FC          (7,680.40) CM Ratio = Cont/ Sales 19.58% BEP in $ = FC/CM Ratio    1,239,219.06 BEP in Units = 1,239,219.06/48          25,817.06 Degree of operating leverage= Cont/EBIT                (30.60)

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