2. Change all of the numbers in the data area of your worksheet so that it looks

Question

2. Change all of the numbers in the data area of your worksheet so that it looks like this: Chapter 5: Applying Excel 3 Data 4 Unit sales 5 Selling price per unit 6 Variable expenses per unit 7 Fixed expenses 40,000 units 20 per unit $14 per unit 120,000 If your formulas are correct, you should get the correct answers to the following questions. (a) What is the break-even in dollar sales? -even in dollar sales 400,000 (b) What is the margin of safety percentage? Margin of safety (c) What is the degree of operating leverage? (Round your answer to 2 decimal places.) ree of operating leverage 2.00 3. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%. increase in net operating income

Explanation / Answer

3) Percentage increase in net operating income = Degree of operating leverage x percentage change in sales

Percentage increase in net operating income = 2 x 20% = 40%

4b)

Sales Net operating income % NOL Net operating income with sales at 40,000 units 800000 120000 15.00% Net operating income with sales at 48,000 units 960000 168000 17.50% Percentage increase in net operating income 2.50% By what percentage did operating income increase (2.5% / 15%) 16.67%

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