Question

16 und unpack and di OP DATE: 01 STAPLES PROCEDURE Cola Gel Medication De AFRIN MASALSA CLFGAM SINTON SkinCream 120.000 Bothail 200.00 GICEL FIBRILAR 24 AINE 0. STREPI Budbeled salesthuils Eredelsales Variablecasts/unit 13 UROPIN (ROPIVACAINE TS etainer) erence Card BIALY 040, No Sales cuenue Cab Vor dalecosiscord Contr. Magin - Fixed costs Net Income 5.0 00 (400D 840.000 (690000 $200,000 (600.000) 600.000 435000) 9165.00 (640,00) 400.000 (120.000 $ 280,000 SPEEL PACK ORS WEEDLE HOLDER (PEEL ruary 2020 11 12 13 14 15 19 20 21 22 26 27 28 29 For each product, determine the percentage Change in net income that results from the 20ole increase in sales? SCIAL OSTEOTOM

Answer 1

This problem can be solved in two different ways. Both the ways had been worked out here.

Option 1: Operating Leverage = Contribution Margin/ Net income Slaincoven Contribution margin $8,40,000 Net Income $2,30,000 Bothoil $6,00,000 $1,65,000 Colagel $4,00,000 $2,80,000 Degree of Operating Leverage 3.65 3.64 1.43 ($840000/$230000] ($600000/$165000]($400000/$280000] Sales Increases by 20% then Net Income increases by Net income increases by 73.04% [3.65 x 20%] 72.73% (3.64 x 20%] 28.57% (1.43 x 20%] Option 2: Slaincoven Bothoil $9 $6 Sales Price Variable Cost Variable Cost %age $3 Colagel $13 $8 61.54% $2 22.22% 50.00% Slaincoven Bothoil Sales $12,96,000 $14,40,000 ($1080000*120%] ($1200000*120%] Less: Variable Cost -$2,88,000 $7,20,000 ($1296000 x 22.22%] [$ 1440000 x 50%) Contribution Margin $10,08,000 $7,20,000 Less: Fixed Cost $6,10,000 $4,35,000 Net Income $3,98,000 $2,85,000 Less: Net Income Before increase $2,30,000 -$1,65,000 Increase in Net Income $1,68,000 $1,20,000 Increase in percentage 73.04% 72.73% Colagel $12,48,000 ($1040000*120%] $7,68,000 ($1248000 x 61.54%] $4,80,000 $1,20,000 $3,60,000 $2,80,000 $80,000 28.57%