Homework Answers
1a) calculate breakeven sales in dollars before automation
Break even point sales in dollars = fixed cost/profit volume ratio
Profit volume ratio is also called contribution margin ratio
Contribution margin ratio = contribution/sales×100
Therefore
Contribution margin ratio =$83000/$191000×100= 43.45%
break even point sales in dollars= $11000/43.45%= $25316.45
1b) calculate break even sales in dollars after automation
contribution margin ratio=$150000/$191000×100=78.53%
break even sales in dollars = $57000/78.53%=$72584
2a)calculate operating leverage before automation
Operating leverage= contribution margin/net operating income
=$83000/$72000=1.152
2b) calculate operating leverage after automation
. Operating leverage=$150000/$93000=1.61
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