Question

Home Insert Design Layout References Mailings Review View $130,000 Income Statement Year Ending December 31, 2016 Sales Cost
16 Test Bank for Managerial Accounting Seventh product Gregs Breads can produce and sell only one of the following Oven Cont
0 0
Add a comment Improve this question Transcribed image text
Answer #1

(a). Break-even point in sales dollars under current policy = $74000

Explanation;

Formula of break even is as follow;

Break-even in sales dollars = (Fixed costs / pv ratio

Sales = $130,000

Variable costs = 58500 + 16250 = 74750

Contribution = 130000 - 74750 = 55250

pv ratio = 55250 / 130000 = 0.425

Break-even in sales dollars = 31450 / 0.425 = 74000

part b)

Break even point in sales dollars = Total Fixed Cost/ Contribution Margin

Total Fixed Cost = 14350+17100+13000=44450

Contribution Margin Ratio= Sales - Variable Cost / Sales

=130000- (58500+13000)/130000

=58500/130000

= 0.45

Break Even Point in Sales = 44450/0.45 = 98777.78 = $98778

c. Degree of operating leverage:

Sales agents Own sales staff
Sales 130,000 130,000
Variable costs 74,750 71,500
Contribution margin 55,250 58,500
Fixed costs 31,450 44,450
EBIT 23,800 14,050
DOL 2.32 4.16

Degree of operating leverage ( DOL) = Contribution margin / EBIT

Add a comment
Know the answer?
Add Answer to:
Home Insert Design Layout References Mailings Review View $130,000 Income Statement Year Ending December 31, 2016...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT