Question

JPL, Inc. has provided its sales and expense data for the most recent period. The Controller has asked you prepare a spreadsheet that shows the related CVP Analysis computations. Use the information included in the Excel Simulation and the Excel functions described below to complete the task. Cell Reference: Allows you to refer to data from another cell in the worksheet. From the Excel Simulation below, if in a blank cell, "=B5" was entered, the formula would output the result from cell B5, or 75 in this example. • Basic Math functions: Allows you to use the basic math symbols to perform mathematical functions. You can use the following keys: + (plus sign to add), - (minus sign to subtract), * (asterisk sign to multiply), and / (forward slash to divide). From the Excel Simulation below, if in a blank cell “=B5+B6” was entered, the formula would add the values from those cells and output the result, or 120 in this example. If using the other math symbols the result would output an appropriate answer for its function.

Answer 1

Unit sales	11200	Units
Selling price per unit	75	Per unit
Variable expenses per unit	45	Per unit
Fixed expenses	210000
1. CM ratio and variable expense ratio
Selling price per unit	75	Per unit
Variable expenses per unit	45	Per unit
Contribution Margin per unit	30	Per unit
CM ratio = Contribution margin /Sales	40%
Variable expense ratio = Variable expense/Sales	60%
2. Break even Point
Break even in unit sales =Fixed expenses/ Contribution margin per unit	= 210000/30
	= 7,000	Units
Break even in dollar sales = Fixed expenses /CM Ratio	= 210,000/40%
Break even in dollar sales	=525,000
3. Margin of safety
margin of safety in dollar = Actual sales - Break even sales	= (11,200*75) -525,000
	= 315,000
margin of safety percentage= = (Actual sales - Break even sales)/ Actual Sales *100	= (840,000 -525,000)/840,000 *100
	= 37.50%
4. Degree of operating leverage
Sales	840000
Variable expenses	504000
Contribution margin	336000
Fixed Expenses	210000
Net Operating income	126000
Degree of Operating leverage	= 336,000/126,000
	2.67