pS 6) What is the BEP in units? 7) What is the BEP in dollars? What if Sally wan

Question

pS 6) What is the BEP in units? 7) What is the BEP in dollars? What if Sally wants to earn $6,600 income over the 3 month season: How will she have to sell? What, is the sales in dollars,if her income is to be $6,6007 8) many subs 6e 9) What will Sall's income be if she sells 1,100 subs over the season? Prepare the contribution margin income statement. 10) Using the income statement above in 9, what is the degree of operating leverage? 11) If Sally expects her sales to increase by 10% next season what is her net income? Dan(onRS t?rent Dr degree oroRy.ry ieto

Explanation / Answer

Computation of Contribution/Sub & margin Ratio Sales $16.60 Variable Cost Sub-Roll $3.60 wages $1.00 wrapping $0.30 bag $0.20 Bag of Chips $0.50 $5.60 Contribution/Sub $11.00 Contribution Margin Ratio 66.27% Computation of Fixed Cost Permit $650.00 Insurance ($300*3) $900.00 Salaries ($1500*3) $4,500.00 Total $6,050.00 6) Breakeven in Unit = Fixed Cost/Contribution per Sub = $6050/$11=550 Sub BEP in unit will be 550 Sub 7) Breakeven in $ = Fixed Cost/Contribution Margin Ratio = $6050/66.27%=$9129 BEP in unit will be $9129 8) Computation of No. of Unit Sales to Earn $6600 Fixed Cost 6050 Target Income 6600 Total contrinution Require 12650 Contribution per Sub 11 No of Sub to be sold (12650/11) 1150 In Dollar ( 12650/66.27%) $19,089 9. Contribution Margin Income Statement No of Unit Sold 1100 Salesn ($16.60X1100) $16.60 $18,260.00 Less: Variable Cost Sub-Roll $3.60 $3,960.00 wages $1.00 $1,100.00 wrapping $0.30 $330.00 bag $0.20 $220.00 Bag of Chips $0.50 $550.00 Total Variable Cost $5.60 $6,160.00 Contribution $11.00 $12,100.00 Less: Fixed Cost $6,050.00 Net Income $6,050.00 10. Degree of Operating Leverage= Contribution/Net Income =$12100/$6050=2 11. Expected Net Income when Sales increase by 10% Degree of operating LeaverageX % increase in Sales =2X10%=20%

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