Question

[The following information applies to the questions displayed below.] Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 60,000 39,000 21,000 14,700 $ 6,300

Answer 1

Requirement 11 Margin of safety in dollars = Total Sales - Break Even sales Break even sales - Fixed cost / CM ratio Cm ratio = 21000/60000 Break even sales = 14700/35% 35.00% $ 42,000.00 Therefore, Margin of safety in dollars = $60,000 - $42,000 Margin of safety in (%) = $18000/$60000 $ 18,000.00 30% Requirement 12 Degree of Operating Leverage = Contribution / Net operating Income 21000/6300 3.33 Times Requirement 13 Degree of Operating income = % change in net income / % change in sales 3.33 = % change in income / 5% % change in net income = 5%*3.33 16.67% Requirement 14 Sales Less : variable expense Contribution Less: Fixed cost Net operating income $ 60,000.00 $ (14,700,00) $ 45,300.00 $ (39,000.00) $ 6,300.00 Degree of Operating Leverage = Contribution / Net operating Income 45300/6300 7.19 Times Requirement 15 Degree of Operating income = % change in net income / % change in sales 7.19 = % change in income / 5% % change in net income = 5%*7.19 35.95%