Question

Required information The Chapter 5 Form worksheet is to be used to create your own worksheet version of the Review Problem example in the text. 2. Change all of the numbers in the data area of your worksheet so that it looks like this: Chapter 5: Applying Excel 4 Data Unit sales Selling price per unit Variable expenses per unit Fixed expenses 80,000 units 50 per unit 20 per unit 6 1.800.000 If your formulas are correct, you should get the correct answers to the following questions (a) What is the break-even in dollar sales? Break-even in dollar sales (b) What is the margin of safety percentage?

Answer 1

Answer:

Data Unit sales Selling price per unit Variable expense per unit Fixed expense 80,000 units 50 per unit 20 per unit 1,800,000 $ Contribution margin per unit CM ratio 30 per unit 60 % (a). Break-even in dollar sales (Fixed expense / CM ratio) $ 3,000,000 Actual sales (80,000 * $50) $ Margin of safety in dollar sales (Actual sales - Break even in dollar sales) $ (b). Margin of safety percentage (MOS in dollar sales / Actual sales * 100) 4,000,000 1,000,000 25 % Contribution margin (80,000 * $30) Operating income (Contribution margin- fixed expense) Degree of operating leverage (Contribution margin / Operating income) $ $ 2,400,000 600,000 4.00 times (c). DOL = 4 times % change in operating income / % change in sales = 4 times % change in operating income / 20 = 4 times % change in operating income = 80% (d). Percentage increase in net operating income 80 %