When a company nears the break-even point, its operating leverage will:
not change
dramatically decrease
dramatically break-even
dramicatically increase
Under absorption costing, how can net income increase without sales increasing?
decrease variable costs |
||
decrease fixed costs |
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increase production |
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increase production manager's salary |
Answers
When a company nears the break-even point, its operating leverage will: not change dramatically decrease dramatically...
Contribution Margin, Break-Even Units, Break-Even Sales, Margin of Safety, Degree of Operating Leverage Aldovar Company produces a variety of chemicals. One division makes reagents for laboratories. The division's projected income statement for the coming year is: Sales (203,000 units @ $70) $14,210,000 Total variable cost 8,120,000 Contribution margin $6,090,000 Total fixed cost 4,945,500 Operating income $1,144,500 Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. Calculate the contribution margin ratio and use it to...
Contribution Margin, Break-Even Units, Break-Even Sales, Margin of Safety, Degree of Operating Leverage Aldovar Company produces a variety of chemicals. One division makes reagents for laboratories. The division's projected income statement for the coming year is: Sales (203,000 units @ $70) $14,210,000 Total variable cost 8,120,000 Contribution margin $6,090,000 Total fixed cost 4,945,500 Operating income $1,144,500 Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. Calculate the contribution margin ratio and use it to...
(Break-even point and operating leverage) Rockstar, Inc. manufactures a complete line of men's and women's casual shoes for independent merchants. The average selling price of its finished product is $95 per pair. The variable cost for this same pair of shoes is $45. Footwear Inc. incurs fixed costs of $180,000 per year. a. What is the break-even point in pairs of shoes sold for the company? b. What is the dollar sales volume the firm must achieve to reach the...
Break-Even in Units, Target Income, New Unit Variable Cost, Degree of Operating Leverage, Percent Change in Operating Income Reagan, Inc., has developed a chew-proof dog bed-the Tuff-Pup. Fixed costs are $204,400 per year. The average price for the Tuff-Pup is $36, and the average variable cost is $22 per unit. Currently, Reagan produces and sells 20,000 Tuff-Pups annually. Required: 1. How many Tuff-Pups must be sold to break even? units 2. If Reagan wants to earn $95,900 in profit, how...
Break-Even in Units, Target Income, New Unit Variable Cost, Degree of Operating Leverage, Percent Change in Operating Income Reagan, Inc., has developed a chew-proof dog bed—the Tuff-Pup. Fixed costs are $208,000 per year. The average price for the Tuff-Pup is $36, and the average variable cost is $23 per unit. Currently, Reagan produces and sells 20,000 Tuff-Pups annually. Required: 1. How many Tuff-Pups must be sold to break even? units 2. If Reagan wants to earn $71,500 in profit, how...
1. Margin of Safety a. If Canace Company, with a break-even point at $256,000 of sales, has actual sales of $400,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales? Round the percentage to the nearest whole number. 1. $ 2. % b. If the margin of safety for Canace Company was 45%, fixed costs were $2,074,050, and variable costs were 55% of sales, what was the amount of actual sales (dollars)?...
reflects last year’s operations:Sales $18,000,000Variable costs 7,000,000Revenue before fixed costs $11,000,000Fixed costs 6,000,000EBIT $5,000,000Interest expense 1,750,000Earnings before taxes (EBT) $3,250,000Taxes 1,250,000Net income $2,000,000REQUIRED:1. At this level of output, what is the degree of operating leverage?2. What is the degree of financial leverage?3. What is the degree of combined leverage?4. If sales increase by 15%, by what percent would EBT (and net income) increase?5. What is your firm’s break-even point in sales dollars?
Problem 2-29 (Algo) Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety (L02-4, LO2-5, LO2-7, LO2-8] Morton Company's contribution format income statement for last month is given below: Sales (48,000 units x $28 per unit) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,344,000 940, 800 403, 200 322,560 $ 80,640 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according...
1) At the break even point of 400 units, variable cost were $400 and fixed costs were $200. how much will the 401st unit sold contribute to operating profit before income taxes? 2) Break even would not change if : a) sales price increases, b) fixed cost decrease, c) sales volume decrease, d) variable cost per unit increase 3) what is break even point in dollars? sales price: $100, variable cost per unit: $40, total fixed cost :$ 120,000 4)...
a) Degree of operating leverage = Contribution margin / profit Degree of operating leverage = 15,600,000 / 6,000,000 = 1.625 Sales = 1200000 x 24 = 28800000 Less: Variable cost = 1200000 x 11 = 13200000 Contribution Margin = 28800000 - 13200000 = 15,600,000 Less: Fixed cost = 9,600,000 Profit = 15600000-9600000 = 6000000 b) Break even units Contribution margin per unit = Selling price - variable cost = $24 - $11 = $13 Break even units = Fixed cost...