Thanks for the help and your time!
50000 | ||||||||||
Current | Proposed | |||||||||
1) | Amount | per unit | Amount | per unit | ||||||
Sales | 1,000,000 | 20 | 1000000 | 20 | ||||||
Variable expenses | 700,000 | 14 | 400000 | 8 | ||||||
Contribution margin | 300,000 | 6 | 600000 | 12 | ||||||
Fixed expenses | 240,000 | 540,000 | ||||||||
Net operating income | 60,000 | 60,000 | ||||||||
2) | Degree of operating leverage = | Contibution /net income | ||||||||
Current | proposed | |||||||||
a) | Degree of operating leverage | 5 | 10 | |||||||
b) | Break even point in dollars = | (fixed cost/contribution margin per unit)*selling price per unit | ||||||||
Current | proposed | |||||||||
Break even point in dollars | 800000 | 900000 | ||||||||
c) | Margin of safety in dollars = | Actual sales -break even sales | ||||||||
Margin of safety(percentage)= | Margin of safety/Actual sales | |||||||||
Current | proposed | |||||||||
Margin of safety | 200,000 | 100000 | ||||||||
Margin of safety (percentage) | 20% | 10% | ||||||||
3) | Cyclical movements in economy | |||||||||
4) | Sales | (50000*130%*20) | 1300000 | |||||||
Fixed cost | 383000 | |||||||||
net operating income (60000*120%) | 72000 | |||||||||
income statement under new marketing strategty | ||||||||||
Amount | % | |||||||||
Sales | 1300000 | 100% | ||||||||
variable cost | 845000 | 65% | ||||||||
contribution margin | 455000 | 35% | ||||||||
fixed cost | 383000 | |||||||||
net operating incoem | 72000 | |||||||||
Break even point in dollars = | 1094286 | |||||||||
Thanks for the help and your time! Problem 5-29 Changes in Cost Structure; Break-Even Analysis; Operating...
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