Question

2. Change all of the numbers in the data area of your worksheet so that it looks like this: * A B с 1 Chapter 5: Applying Excel aces N 3 4 5 Data Unit sales Selling price per unit Variable expenses per unit Fixed expenses 50,000 units $ 20 per unit 12 per unit $ 360,000 6 $ 7.

Answer 1

2.

Percentage increase in net operating income

200

%

Sales ( 50,000 x $ 20)	$ 1,000,000
Variable costs ( 50,000 x $ 12)	600,000
Contribution margin	400,000
Fixed expenses	360,000
Net Operating Income	$ 40,000

Degree of operating leverage= Contribution Margin / Net Operating Income = $ 400,000 / $ 40,000 = 10

In sales increases by 20 %, percentage change in net operating income = 20 % x 10 = 200 %.

4. a.

Net Operating Income ( loss)

$ 120,000

b.

Percentage increase in net operating income

200

%

Percentage increase in net operating income = $ ( 120,000 - 40,000 ) / $ 40,000 = 200 %

5. a.

Break-even in unit sales

150

Break-even in unit sales = Annual fixed cost / Contribution Margin per Unit = $ 810,000 / $ ( 18,000 - 12,600) = 150 units

b.

Margin of safety in dollars

$ 2,700,000

Margin of safety in dollars = Expected Sales Revenue - Break-even Sales Revenue = 300 units x $ 18,000 - 150 units x $ 18,000 = $ 2,700,000

c.

Degree of Operating Leverage

2

Sales	$ 5,400,000
Variable costs	3,780,000
Contribution margin	1,620,000
Fixed Costs	810,000
Operating Income	$ 810,000

Degree of operating leverage = Contribution Margin / Operating Income = $ 1,620,000 / $ 810,000 = 2

d.

Net operating income ( loss)

$ (228,000)