Question 1. How many units must be sold to achieve a target profit of: $ 5,000 ?

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Question 1. How many units must be sold to achieve a target profit of:      $ 5,000   ?

[Question 2 - 15]

Question 2. What is the variable expense ratio?

Question 3. What is the contribution margin ratio?

Question 4. What is the unit contribution margin?

Question 5. If sales decline to 2250 units. What would be the net operating income?

Question 6. The above data shows the Toyota's income statement assuming that the total variable expenses and total fixed expenses were reversed and that total sales remain the same. Under this scenario, what is the degree of operating leverage?

Question 7. Using the degree of operating leverage you computed in the previous question, if there is a 5% increase in sales, what is the estimated percent increase in net operating income?

Question 8. What is the degree of operating leverage?

Question 9. Using the degree of operating leverage, if there is a 5% increase in sales, what is the estimated percent increase in net operating income?

Question 10. What is the margin of safety in dollars? What is the margin of safety percentage?

Question 11. What is the break-even point in sales dollars?

Question 12. If the variable cost per unit increases by $ 1 per unit, spending on advertising increases by $ 3,750 , and

unit sales increase by 625 units.

What is net operating income?

Question 13. What is the break-even point in unit sales?

Question 14. Assume sales increase to 2501units. What would be the increase in net operating income?

Question 15. If the selling price increases by $2 per unit, and the sales volume decreases by 250 units.

What would be the net operating income?

Toyota Company prepared the following contribution format income statement based on a sales volume of: 2500 units

Explanation / Answer

1.) 2500 units must be sold to achieve $5000 profits

2.) Variable expense ratio =Variable cost/Sales=30000/50000=3/5=60%

3.) Contribution Margin Ratio=1-Variable expense ratio=1-60%=40%

4.) Unit Contribution Margin = Contribution Margin/Sales Unit=20,000/2500 = $8 per unit

5.) Sales = 2250 unit

Contribution margin = 20000*2250/2500=$18,000

Fixed Costs=$15000

Net Operating Income=$3,000

6.) Degree of operating Leverage=Contribution/(Contribution-Fixed COsts)=35000/(35000-30000)=7=700%

7.) Net increase in opearting margin=700*5%=35%

Assumption is fixed and variable costs have been reversed in above 2 questions

8.) Degree of operating Leverage=Contribution/(Contribution-Fixed COsts)=20000/(20000-15000)=4=400%

9.) Net increase in opearting margin=400*5%=20%

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