Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses...

Question

Question

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00

Assume the president expects this years sales to increase by 19%. Using the degree of operating leverage from last year, wha

The sales manager is convinced that a 15% reduction in the selling price, combined with a $65,000 increase in advertising, wo

The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.40 per unit

business accounting

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Degree of operating leverage = Contribution margin/Net operating income = 1560000/1400000 = 1.11

5) Net operating income increase by = 1.11*19 = 21.09%

6) Contribution margin income statement

	Total	Per unit
Sales (26000*1.25)	3315000	120*85% = 102
Variable cost	1950000	60
Contribution margin	1365000	42
Fixed cost (160000+65000)	225000
Net income	1140000

7) Net operating income (decrease) by = 1140000-1400000 = -260000

8) Contribution margin income statement

	Total	Per unit
Sales (26000*1.25)	3900000	120
Variable cost	2028000	62.40
Contribution margin	1872000	57.60
Net income	1400000
Fixed cost	472000

Total fixed cost-Present fixed cost = 472000-160000 = 312000

The amount by which advertising can be increased = 312000

Add a comment

Answer 2

Similar Homework Help Questions

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses...

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 sales...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses...

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 $ 3,000,000 Variable expenses 1,500,000 Contribution margin 1,500,000 Fixed expenses 160,000 Net operating income $ 1,340,000 5. The sales manager is convinced that a 11% reduction in the selling price, combined with a $60,000 increase in advertising, would increase this year's unit sales...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses...

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 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 break-even point...

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses...

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 $ 3,120,000 Variable expenses 1,560,000 Contribution margin 1,560,000 Fixed expenses 180,000 Net operating income $ 1,380,000 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...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses...

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 $ 3,120,000 Variable expenses 1,560,000 Contribution margin 1,560,000 Fixed expenses 180,000 Net operating income $ 1,380,000 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...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses...

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: Variable expenses Contribution margin Fixed expenses Net operating income $ 3, 120, eee 1, 55e, Bee 1,550,000 10,eee $ 1,398,eee 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...

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses...

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 $ 3,000,000 Variable expenses 1,500,000 Contribution margin 1,500,000 Fixed expenses 160,000 Net operating income $ 1,340,000 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...
Feather Friends, Inc, distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses...

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 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 break-even point...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses...

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 $80 per unit. Variable expenses...

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows: Sales $ 2,080,000 Variable expenses 1,040,000 Contribution margin 1,040,000 Fixed expenses 160,000 Net operating income $ 880,000 5. The sales manager is convinced that a 14% reduction in the selling price, combined with a $64,000 increase in advertising, would increase this year's unit sales...

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses...

Homework Answers

Add Answer to:
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses...

Post as a guest

Earn Coins