Question

1. A company sold a total of 1,000 units for total sales revenue of $65,000. The company incurred total variable expenses of $45,500 and total fixed expenses of $ 14,040. Based on this, the company reported a total contribution margin of $19,500 and net operating income of $ 5,460. Use this information to answer the following questions. Assume that all units are within the relevant range.

Calculate the per-unit contribution margin. (Round your answer to 2 decimal places.)?

Calculate the contribution margin ratio?

Calculate the increase in net operating income if sales increase to 1,001 units. (Round your answer to 2 decimal places.)

Calculate the net operating income if the selling price increases by $2 per unit and the sales volume decreases by 100 units?

Calculate the net operating income if the variable cost per unit increases by $1, spending on fixed costs increases by $1,550, and unit sales increase by 210 units?

Calculate the break-even point in unit sales?

Calculate the break-even point in sales dollars?

Calculate the number of units that must be sold to earn a target profit of $11,700?

Calculate the margin of safety in dollars and the margin of safety percentage?

Calculate the degree of operating leverage. (Round your answer to 2 decimal places.)?

Calculate the estimated percent increase in net operating income for a 5% increase in sales. (Hint: Use the degree of operating leverage you already computed.)  (Round your intermediate calculations and final answer to 2 decimal places.)?

Answer 1

Solution 1) Contribution per unit $ $ 19,500 / 1000 19.50 per unit II Solution 2) Contribution margin ratio $ 19,500 / $ 65,000 30% Solution 3) Increase in Net Operating Income = 1 unit x $ 19.50 $ 19.50 Solution 4) Sales ($67 x 900) Variable cost ( $45.5 x 900) Contribution less: Fixed Cost Net Operating Income $ $ $ $ $ 60,300 40,950 19,350 14,040 5,310 Solution 5) Sales Variable cost ( $46.5 x1000) Contribution less: Fixed Cost ($ 14040 + 1550) Net Operating Income $ $ $ $ $ 65,000 46,500 18,500 15,590 2,910 Solution 6) Break Even (units) Fixed Cost / Contribution per unit $ 14,040 / $19.5 720 units

Solution 7) Break Even ($) Fixed Cost / Contribution % $ 14,040 / 30% $ 46,800 = Solution 8) Target Sales (units) (Fixed Cost + target profit) / Contribution per unit $ 25,740 / $19.5 1,320 units Solution 9) Margin of Safety = Sales - Break even Sales $ 65,000 $ 18,200 $ 46,800 Margin of Safety % $ 18,200 / $ 65,000 28% Solution 10) Degree of Operating Leverage = Contribtuion / Operating Income $ 19,500 / $ 5,460 3.57 Il Solution 11) % Increase in Net Op Income = Il Degree of Op Leverage x % increase in Sales 3.57 x 5% 17.86% =

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