Question

1 Given the following information complete a CV analysis 2 for JPL, Inc.: 5 Selling price per unit 6 Variable expenses per unit 7 Fixed expenses 11,200 units $75 per unit $45 per unit $210,000 9 Use the data to answer the following. 10 11 1. Compute the CM ratio and variable expense ratio 12 Selling price per unit 13 Variable expenses per unit 14 Contribution margin per unit per unit per unit per unit 16 CM ratio 17 Variable expense ratio 19 2. Compute the break-even point 20 Break-even in unit sales 21 Break-even in dollar sales units 23 3. Compute the margin of safety 24 Margin of safety in dollars 16 CM ratio 17 Variable expense ratio 19 2. Compute the break-even point 20 Break-even in unit sales 21 Break-even in dollar sales units 23 3. Compute the margin of safety 24 Margin of safety in dollars 25 Margin of safety percentage 27 4. Compute the degree of operating leverage 28 Sales 29 Variable expenses 30 Contribution margin 31 Fixed expenses 32 Net operating income 34 Degree of operating leverage

Answer 1

	Unit sales	11200	units
	Selling price per unit	$                  75
	Variable expenses per unit	$                  45
	Fixed expenses	$       2,10,000
1]	Selling price per unit	$                  75
	Variable expenses per unit	$                  45
	Contribution margin per unit	$                  30
	CM Ratio = CM per unit/Selling price per unit = 30/75 =	40.00%
	Variable expense ratio = Variable cost per unit/Selling price per unit = 45/75 =	60.00%
2]	Break even in unit sales = Fixed cost/CM per unit = 210000/30 =	7000	Units
	Break even in dollar sales = Fixed cost/CM ratio = 210000/40% =	$      5,25,000
3]	Margin of safety in dollars = Current sales-Breakeven sales = (11200*75)-525000 =	$      3,15,000
	Margin of safety in % = MS in dollars/Current sales = 315000/(11200*75) =	37.50%
4]	Sales	$      8,40,000
	Variable expenses	$      5,04,000
	Contribution margin	$      3,36,000
	Fixed costs	$      2,10,000
	NOI	$      1,26,000
	Degree of operating leverage = CM/NOI = 336000/126000 =	2.67