Problem 6-23 CVP Applications; Contribution Margin Ratio: Degree of Operating Leverage [LO6-1, LO6-3, LO6-4, LO6-5, LO6-8]
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows:
Sales | $ | 1,040,000 |
Variable expenses | 520,000 | |
Contribution margin | 520,000 | |
Fixed expenses | 180,000 | |
Net operating income | $ | 340,000 |
Required:
Answer each question independently based on the original data:
4-a. What is the degree of operating leverage based on last year's sales?
4-b. Assume the president expects this year's sales to increase by 18%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year?
5. The sales manager is convinced that a 14% reduction in the selling price, combined with a $65,000 increase in advertising, would increase this year's unit sales by 25%.
a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented?
b. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year?
6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.90 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $340,000 net operating income as last year?
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Problem 6-23 CVP Applications; Contribution Margin Ratio: Degree of Operating Leverage [LO6-1, LO6-3, LO6-4, LO6-5, LO6-8]...
Problem 6-23 CVP Applications; Contribution Margin Ratio: Degree of Operating Leverage [LO6-1, LO6-3, LO6-4, LO6-5, LO6-8] Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 1,040,000 Variable expenses 520,000 Contribution margin 520,000 Fixed expenses 180,000 Net operating income $ 340,000 Required: Answer each question independently based on the original data: 1....
Problem 6-23 CVP Applications; Contribution Margin Ratio: Degree of Operating Leverage (LO6-1, LO6- 3, LO6-4, LO6-5, LO6-8) Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 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 $1,040,000 520,000 520,000 180,000 $ 340,000 Required: Answer each question independently based on the original data: 1....
10 Problem 6-23 CVP Applications; Contribution Margin Ratio: Degree of Operating Leverage (L06-1, LO6- 3, LO64, LO65, LO6-8]. Feather Friends, Inc. distributes a high-quality wooden birdhouse that sells for $20 per unit Variable expenses are $ 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 et operating income 160.000 200.00 Required: Answer each question independently based on the original data: 1. What is the...
Please work out so that I can understand. Thanks. Problem 6-23 CVP Applications; Contribution Margin Ratio: Degree of Operating Leverage [LO6-1, LO6-3, LO6-4, LO6-5, LO6-8] 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 $180,000 per year. Its operating results for last year were as follows: Sales $ 1,920,000 Variable expenses 960,000 Contribution margin 960,000 Fixed expenses 180,000 Net operating income $ 780,000 Required: Answer...
5. The sales manager is convinced that a 14% reduction in the selling price, combined with a $65,000 increase in advertising, would increase this year's unit sales by 25%. a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? b. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year? 6. The president does not want to change the selling price....
Just question 5-6 Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Sales $ 1,040,000 Variable expenses 520,000 Contribution margin 520,000 Fixed expenses 200,000 Net operating income $ 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...
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 $180,000 per year. Its operating results for last year were as follows: Sales $ 2,000,000 Variable expenses 1,000,000 Contribution margin 1,000,000 Fixed expenses 180,000 Net operating income $ 820,000 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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