Question

A furniture manufacturer specializes in wood tables. The tables sell for $100 per unit and incur $40 per unit in variable costs. The company has $6,000 in fixed costs per month. Expected sales are 200 tables per month. 17. 18. 19. Calculate the margin of safety in units. Determine the degree of operating leverage. Use expected sales. The company begins manufacturing wood chairs to match the tables. Chairs sell for $50 each and have variable costs of $30. The new production process increases fixed costs to $7,000 per month. The expected sales mix is one table for every four chairs. Calculate the breakeven point in units for each product. 17. Calculate the margin of safety in units. Begin by selecting the formula labels and entering the amounts to compute the number of table the company must sell to break even. (Abbreviation used: CM = contribution margin. Complete all answer boxes. For items with a zero value, enter "O".) Required sales in units Select the formula labels and then enter the amounts to compute the margin of safety in units. - = Margin of safety in units 18. Determine the degree of operating leverage. Use expected sales. Begin by selecting the formula labels and then entering the amounts to compute the degree of operating leverage. (Round the degree of operating leverage to four decimal places, X.XXXX.) Degree of operating leverage = =

Answer 1

Question 17 Calculate margin of safety in units Fixed cost Target profit $ . . Contribution margin per unit $ Required sales in units 100 Tables 6,000.00 + 60.00 - Total sales Break even sales Margin of safety in units 200 - 100 = 100 Tables Question 18 Contribution margin Degree of operating Leverage ./ / Net Operating Income = $ 6,000.00 = 12,000.00 2 Times Note : Selling price - variable cost = contribution per unit 100-40-$60 per table Total contribution - 200*60=12000 Question 19 Tables Total Sales price per unit variable cost per unit Contribution margin per unit Sales mix in units Contribution margin. 100.00 40.00 60.00 Chairs $50.00 $ 30.00 $ 20.00 $ 60.00 $80.00 $ 140.00 Weighted avg contribution margin per unit 28.00 Fixed cost ./ + + Target profit $ Weighted avg contribution margin per unit = 28.00 = Required sales in units 250 7,000.00 Break even sales in units Required sales in units X 250 x 250 x Table Chairs Sales mix 1/5. 4/5. 50 200