Question

Lab Math Pear... Login to WebSTAR Dashboard o Mail-cm3069@m... Youlube o Other Bookmark Chapter 6 Assignment i Saved Help Save & Exit Submit Check my work Heather Hudson makes stuffed teddy bears. Recent information for her business follows: $ points Selling price per bear Total fixed cost per month Variable cost per bear 35.50 1,480.00 16.50 Skipped She sells 450 bears this month. eBook Suppose sales increase by 30 percent next month. Calculate the effect that increase will have on her profit. (Round your intermediate calculations to 2 decimal places. Round your final answer to 1 decimal place. (i.e. .123 should be entered as 12.3%)) Increase in profit % Print References

Answer 1

Sales ( 450 * 35.50 )	15975
(-) Variable cost ( 450 * 16.50 )	7425
Contribution margin	8550
(-) Fixed cost	1480
Profit	7070

Degree of operating leverage = Contribution margin / Profit = 8550 / 7070

1.21

Degree of operating leverage = % change in profit / % change in Sales
1.21 = % change in profit / 30%
% change in profit = 1.21 * 30%	36.3%

Increase in profit

36.3%