Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells fo

Question

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable expenses are $8 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows $400,000 160,000 Sales Variable expenses Contribution margin 24,eee Fixed expenses Net operating income $ 68,808 180,800 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales erences sales increase by $75,000 and fixed expenses do not change, how much will net operating income increase? 4-a. What is the degree of operating leverage based on last year's sales? 46 Assume the president expectst is year's sales to increase by 20% using the degree of operating leverage percentage Increase in net operating income will the company realize this year? rom last year, what 5 The sales manager is convinced that a 10% reduction in the selling price, combined with a S30.000 increase in advertising, would increase this year's unit sales by 25%. a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? b. Do you recommen d implementing the sales managers suggestions? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $60,000 net operating income as last year? Complete this question by entering your answers in the tabs below Type here to search

Explanation / Answer

Solution 5(a)

$

Sales

(25000x18)

450000

Less

Variable Expenses

(25000x8)

200000

Contribution

250000

Less

Fixed Expense

Existing

180000

Advertisement

30000

210000

Net Operating Income

40000

Solution 6

$

Sales

(25000x20)

500000

Less

Variable Expenses

(25000x8)

200000

Less

Sales Commission

(25000x1)

25000

Contribution

275000

Less

Fixed Expense

Existing

180000

Advertisement (b/f)

35000

215000

Net Operating Income

60000

Solution 5(a)

$

Sales

(25000x18)

450000

Less

Variable Expenses

(25000x8)

200000

Contribution

250000

Less

Fixed Expense

Existing

180000

Advertisement

30000

210000

Net Operating Income

40000

Solution 6

$

Sales

(25000x20)

500000

Less

Variable Expenses

(25000x8)

200000

Less

Sales Commission

(25000x1)

25000

Contribution

275000

Less

Fixed Expense

Existing

180000

Advertisement (b/f)

35000

215000

Net Operating Income

60000

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.