Question

1. Determine the break-even point. 2. Compute the margin of safety and explain its significance 3. Compute the degree of operating leverage at a particular level of sales and explain how it can be used to predict changes in net operating income CVP Analysis - Excel 7 - 6 X BS.. HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Sign in B I U. 23 - Clipboard A. Alignment Number Conditional Format Cell Cells Formatting" Table Styles Styles Given the following information complete a CVP analysis Giver A1 v xv ven the following information complete a crianalysis 3r JPL Inc.: Init sales elling price per unit ariable expenses per unit ixed expenses 11.200 units $75 per unit 545 per unit $210.000 7 9 Ise the data to answer the following . Compute the CM ratio and variable expense ratio elling price per unit ariable expenses per unit ontribution margin per unit 16 Mratio 17 ariable expense ratio 19 20 21 Compute the break even point reak-even in unit sales reak-even in dollar sales

Answer 1

3 4 Sales Units 5 Selling Price Per unit 6 Varaibel Expense Per unit 7 Fixed Expenses 11200 Units 75 Per unit 45 Per unit 210000 75 Per unit Per unit 30 Per unit 40% 60% 7000 Units 525000 Dollars 9 Use the Data To Answer the following 10 11 1. Compute the CM ratio and Varaible Expense ratio 12 Selling Price Per unit 13 Variable costPer unit 14 Contribution Margin per unit (Selling Price - Varible Cost) 15 16 CM Ratio =(CM/Selling Price) 17 Varaible Expense Ratio - (Variable Expense /Selling Price) 18 19 2. Compute the Break Even point 20 Break Even in Unit Sales (Fixed Cost / CM Per unit) 21 Brake Even in Dollar sales =( Fixed Cost/CM ratio) 22 23 3. Compute the Margin of Safety 24 Margin of Safety in dollars =(units selling price - BEP Dollars) 25 Margin of Safety in Percentage =(Margin of safety Dollars Actual sales) 26 27 4. Compute the Operating Leverage 28 Sales 29 Varaible Expenses 30 Contribution Margin 31 Fisced Cost 32 Net operating Income = (CM-Fixed Cost) 33 34 Degree of Operating Leverage (Contrubution Margin/Net operating Income) 315000 37.50% 840000 504000 336000 210000 126000 2.67 times

R Units 3 4 Sales Units 5 Selling Price Per unit 6 Varaibel Expense Per unit 7 Fixed Expenses 11200 75 Per unit Per unit 210000 Use the Data To Answer the following 9 10 11 12 13 14 1. Compute the CM ratio and Varaible Expense ratio Selling Price Per unit Variable costPer unit Contribution Margin per unit(Selling Price - Varible Cost) =B5 =B6 =B12-B13 Per unit Per unit Per unit 15 16 17 CM Ratio =(CM/Selling Price) Varaible Expense Ratio - (Variable Expense /Selling Price) =B14/B12 =B13/B12 18 =B7/B14 =B7/B16 Units Dollars 19 2. Compute the Break Even point 20 Break Even in Unit Sales (Fixed Cost/CM Per unit) 21 Brake Even in Dollar sales =( Fixed Cost/CM ratio) 22 23 3. Compute the Margin of Safety 24 Margin of Safety in dollars =(units selling price - BEP Dollars) 25 Margin of Safety in Percentage =(Margin of safety Dollars / Actual sales) =B28-B21 =B24/B28 27 4. Compute the Operating Leverage 28 Sales 29 Varaible Expenses 30 Contribution Margin 31 Fixed Cost 32 Net operating Income = (CM-Fixed Cost) =B4%B12 =B4%B13 =B28-B29 =B7 =B30-B31 33 34 Degree of Operating Leverage (Contrubution Margin/Net operating Income) =B30/B32 times