Question

ebook E Show Me How Calculator Printiem Impact of Increased Sales on Operating Income Using the Degree of Operating Leverage Head-First Company had planned to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total Fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Operating income at 5,000 units sold is $100,500. The degree of operating leverage is 1.5. Now Head-First expects to increase sales by 10% next year. Unless otherwise instructed, round all total dollar figures (e.g., sales, total contribution margin) to the nearest dollar, breakeven or target units to the nearest unit, and unit costs and unit contribution margins to the nearest cent. Round ratios to four significant digits. Required: 1. Calculate the percent change in operating income expected. fo 2. Calculate the operating income expected next year using the percent change in operating income calculated in Requirement 1. Previous Next > Check My Work Save and Exit Subs

Answer 1

1
Degree of Operating leverage	1.5
X Percentage increase in sales	10%
Percentage change in Operating income	15%
2
Operating income expected next year	115575	=100500*1.15