Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,00
ID: 2642389 • Letter: S
Question
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,000
Variable expenses . . . . . . . . . . . . . . . . . . . . . . . 12,000
Contribution margin . . . . . . . . . . . . . . . . . . . . . . 8,000
Fixed expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Net operating income . . . . . . . . . . . . . . . . . . . . . $ 2,000
1. If sales decline to 900 units, what would be the net operating income?
2. If the selling price increases by $ 2 per unit and the sales volume decreases by 100 units, what would be the net operating income?
3. If the variable cost per unit increases by $ 1, spending on advertising increases by $ 1,500, and unit sales increase by 250 units, what would be the net operating income?
For questions 1-3: (Please use the formats below to display answer)
Units
Per unit
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income
Question 4: What is the break- even point in unit sales?
Profit = Unit CM X Q - Fixed expenses
= units
Question 5: What is the break- even point in dollar sales?
Profit = CM ration X Sales - Fixed Expenses
=
Question 6: How many units must be sold to achieve a target profit of $ 5,000?
Profit = Unit CM X Q - Fixed expenses
= Units
Question 7: What is the margin of safety in dollars? What is the margin of safety percentage?
Sales
Break-even sales at units
Margin of safety (in dollars)
Margin of safety (in dollars)
Sales
Margin of safety percentage
Question 8: What is the degree of operating leverage?
Contribution margin
Net operating income
Degree of operating leverage
Question 9: Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in sales?
Degree of operating leverage
% increase in sales
% increase in net operating income
Question 10: Assume that the amounts of the company
Explanation / Answer
Answer 1:
Assuming the initial sales unit as 1000 units,
Answer 2:
Answer 3:
Operating profit will increase by $1750.
3750
Answer 4:
Break even point in unit sales = Fixed cost / Contribution per unit = 6000/ 8 = 750 units
Profits = 750*20 -6000 = 15000-6000=9000
Answer 5:
Break even in dollars = Fixed cost / contribution = 6000/8000 = 0.75
Profit = 0.75*20000-6000=9000
Answer 6 :
Desired Sales = Fixed cost +Target Profit / Contribution per unit=6000+5000/8=1375 units
Answer 7:
Sales = $20000
Break-even sales at units =750
Margin of safety (in dollars) =250 units
Margin of safety (in dollars) = $ 5000
Sales
Margin of safety percentage = 25%
Answer 8:
Contribution margin = $8000
Net operating income =$2000
Degree of operating leverage =2000/8000 =0.25
Answer 9:
Degree of operating leverage =0.25
% increase in sales = 5%
% increase in net operating income = 5/0.25 = 20%
Answer 10:
Contribution margin = $20000- $ 6000 = $ 14000
Net operating income = $2000
Degree of operating leverage = 2000/14000 =0.15
Answer 11:
Degree of operating leverage = 0.15
% increase in sales = 5%
% increase in net operating income = 5/ 0.15 = 33.33%
1. If sales decline to 900 units then operating profit will decrease by $800. Units 900 Per unit 20 Sales 18000 Variable expenses 10800 Conribution Margin 7200 Fixed Expenses 6000 Net Operating Income 1200Related Questions
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