Answer to Question 1:
Answer 1.
Number of units sold = Sales / Selling Price per unit
Number of units sold = $3,120,000 / $120
Number of units sold = 26,000
Contribution Margin Ratio = Contribution Margin / Sales
Contribution Margin Ratio = $1,560,000 / $3,120,000
Contribution Margin Ratio = 50%
Answer 2.
Breakeven in dollar sales = Fixed Expenses / Contribution Margin
Ratio
Breakeven in dollar sales = $180,000 / 0.50
Breakeven in dollar sales = $360,000
Answer 3.
Increase in Sales = $56,000
Increase in Net Operating Income = Increase in Sales *
Contribution Margin Ratio
Increase in Net Operating Income = $56,000 * 50%
Increase in Net Operating Income = $28,000
Answer 4-a.
Degree of Operating Leverage = Contribution Margin / Net
Operating Income
Degree of Operating Leverage = $1,560,000 / $1,380,000
Degree of Operating Leverage = 1.13
Answer 4-b.
% Increase in Sales = 20%
Degree of Operating Leverage = % Increase in Net Operating
Income / % Increase in Sales
1.13 = % Increase in Net Operating Income / 20%
% Increase in Net Operating Income = 22.60%
Answer 5.
Selling Price per unit = $120 - 14% * $120
Selling Price per unit = $103.20
Variable Expense per unit = $60.00
Fixed Expenses = $180,000 + $62,000
Fixed Expenses = $242,000
Number of units sold = 26,000 + 25% * 26,000
Number of units sold = 32,500
No, the manager should not implement these changes as net operating income will decrease by $218,000 ($1,380,000 - $1,162,000).
Answer 6.
Selling Price per unit = $120
Variable Expense per unit = $60.00 + $2.40
Variable Expense per unit = $62.40
Let increase in advertising be $x
Fixed Expenses = $180,000 + $x
Number of units sold = 26,000 + 25% * 26,000
Number of units sold = 32,500
Net Operating Income = Sales - Variable Expenses - Fixed
Expenses
Net Operating Income = Selling Price per unit * Number of units
sold - Variable Expense per unit * Number of units sold - Fixed
Expenses
$1,380,000 = $120 * 32,500 - $62.40 * 32,500 - ($180,000 +
$x)
$1,380,000 = $3,900,000 - $2,028,000 - $180,000 - $x
$x = $312,000
Increase in advertising expense is $312,000.
песк my work Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per...
QUESTION Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows: Sales $ 2,880,000 Variable expenses 1,440,000 Contribution margin 1,440,000 Fixed expenses 160,000 Net operating income $ 1,280,000 1.) The sales manager is convinced that a 11% reduction in the selling price, combined with a $65,000 increase in advertising, would increase this year's unit...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows: Rectangular Snip Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 3,240,000 1,620,000 1,620,000 160,000 $ 1,460,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 3, 240,000 1,620,000 1,620,000 180,000 $ 1,440,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 3,000,000 Variable expenses 1,500,000 Contribution margin 1,500,000 Fixed expenses 180,000 Net operating income $ 1,320,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point...
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Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income $3,240,000 1,620,000 1, 620,000 180,000 $1,440,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 3,240,000 1,620,000 1,620,000 180,000 $1,440,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in...
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