Oslo Company prepared the following contribution format income statement based o

Question

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):

1. What is the contribution margin per unit? (Round your answer to 2 decimal places.)

2. What is the contribution margin ratio?

4. If sales increase to 1,001 units, what would be the increase in net operating income? (Round your answer to 2 decimal places.)

6. If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income?

7. If the variable cost per unit increases by $1, spending on advertising increases by $1,350, and unit sales increase by 170 units, what would be the net operating income?

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

9. What is the break-even point in dollar sales?

10. How many units must be sold to achieve a target profit of $8,100?

11. What is the margin of safety in dollars? What is the margin of safety percentage?

12. What is the degree of operating leverage? (Round your answer to 2 decimal places.)

13. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in sales? (Round your intermediate calculations and final answer to 2 decimal places.)

Sales $ 45,000 Variable expenses 31,500 Contribution margin 13,500 Fixed expenses 8,640 Net operating income $ 4,860

1. What is the contribution margin per unit? (Round your answer to 2 decimal places.)

2. What is the contribution margin ratio?

4. If sales increase to 1,001 units, what would be the increase in net operating income? (Round your answer to 2 decimal places.)

6. If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income?

7. If the variable cost per unit increases by $1, spending on advertising increases by $1,350, and unit sales increase by 170 units, what would be the net operating income?

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

9. What is the break-even point in dollar sales?

10. How many units must be sold to achieve a target profit of $8,100?

11. What is the margin of safety in dollars? What is the margin of safety percentage?

12. What is the degree of operating leverage? (Round your answer to 2 decimal places.)

13. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in sales? (Round your intermediate calculations and final answer to 2 decimal places.)

Explanation / Answer

1) Contribution margin per unit = 13500/1000 = 13.50

2) Contribution margin ratio = 13500/45000 *100 = 30%

4) Contribution margin (1001 units) = 13.50*1001 = 13513.50

Fixed Expenses = 8640

Net operating Income = 13513.50 - 8640 = 4873.50

Increase in net operating income = 4873.50 - 4860 = 13.50

6) Total sales units = 1000 - 100 = 900

Contribution margin (900 units) = (13.50 - 2)*900 = 10350

Net operating Income = 10350 - 8640 = 1710

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