Dana\'s Ribbon World makes award rosettes. Following is information about the co

Question

Dana's Ribbon World makes award rosettes. Following is information about the company: Variable cost per rosette Sales price per rosette Total fixed costs per month $ 2.60 5.00 4B00.00 Required: 1. Suppose Dana's would like to generate a profit of $1,080. Determine how many rosettes it must sell to achieve this target profit. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.) Units 2. If Dana's sells 2,100 rosettes, compute its margin of safety in units, in sales dollars, and as a percentage of sales. (Round your Margin of Safety percentage to two decimal places (i.e..1234 should be entered as 12.34%). Margin of Safety (Units) Margin of Safety in Dollars Percentage of Sales Rosettes 3. Calculate Dana's degree of operating leverage if it sells 2,100 rosettes. (Round your intermediate calculations to 2 decimal places and final answer to 4 decimal places.)

Explanation / Answer

Req 1. Selling price: $ 5 Variable cost: $ 2.60 Contribution margin per unit : 5.00 -2.60 = $ 2.40 per unit Desired profits: $ 1080 Contribution desired: 1080 +4800 = $ 5880 Desired sales units: Desired conribution/ CM per unit = 5880 /2.40 = 2450 units Req 2: Break even units: Fixed cost / CM per unit = 4800 /2.40 = 2,000 units Margin of safety: Sales - break even units = 2100-2000 = 100 units margin of safety in $: 100 units @$5: $ 500 Margin of safety: 100/2100 *100 = 4.76% Req 3: Contribution margin: 2100*2.4 = $ 5040 Net income: 100*2.40 = $ 240 DOL= Contribution/ Nnet income = 5040 /240 = 21 Req 4: Sales drop to :1848 units % decrease in sales (252/2100)*100= 12% Therefore, % decrease in Net income: 252% (i.e. 21*12) Contribution margin income Statement: Revenue (1848 units @5) 9240 Less: variabel cost (1848 units @2.60) 4804.8 Contribution margin   4435.2 Less: Fixed cost 4800 Net income -364.8 Original net income 240 Decrease in income -604.8 % decrease -252%

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

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