Feather Friends, Inc., distributes a high-quality woodenbirdhouse that sells for $80 per unit. Variable expenses are $40.00per unit, and fixed expenses total $180,000 per year.
Required:
Answer the following independent questions:
1.What is the product's CM ratio?
2. Use the CM ratio to determine the break-even point in dollarsales.
3. Due to an increase in demand, the company estimates thatsales will increase by $53,000 during the next year. By how muchshould net operating income increase (or net loss decrease)assuming that fixed expenses do not change?
4. Assume that the operating results for last year were:
Sales $ 2,160,000 Variable expenses 1,080,000 Contribution margin 1,080,000 Fixed expenses 180,000 Net operating income $ 900,000
a. Compute the degree of operating leverage at the current levelof sales. (Round your answer to 2 decimalplaces.)
b. The president expects sales to increase by 17% next year. Bywhat percentage should net operating income increase?(Round intermediate calculations and final answer to 2decimal places.)
Feather Friends, Inc., distributes a high-quality woodenbirdhouse that sells for $80 per unit. Variable expenses are $40.00per unit, and fixed expenses total $180,000 per year.
Required:
Answer the following independent questions:
1.What is the product's CM ratio?
2. Use the CM ratio to determine the break-even point in dollarsales.
3. Due to an increase in demand, the company estimates thatsales will increase by $53,000 during the next year. By how muchshould net operating income increase (or net loss decrease)assuming that fixed expenses do not change?
4. Assume that the operating results for last year were:
| Sales | $ | 2,160,000 | |
| Variable expenses | 1,080,000 | ||
| Contribution margin | 1,080,000 | ||
| Fixed expenses | 180,000 | ||
| Net operating income | $ | 900,000 | |
a. Compute the degree of operating leverage at the current levelof sales. (Round your answer to 2 decimalplaces.)
b. The president expects sales to increase by 17% next year. Bywhat percentage should net operating income increase?(Round intermediate calculations and final answer to 2decimal places.)
Related questions
Feather Friends, Inc., distributes a high-quality woodenbirdhouse that sells for $40 per unit. Variable expenses are $20.00per unit, and fixed expenses total $180,000 per year. |
| Required: | |
| Answer the following independent questions: | |
| 1. | What is the product's CM ratio? |
| 2. | Use the CM ratio to determine the break-even point in dollarsales. |
| 3. | Due to an increase in demand, the company estimates that saleswill increase by $43,000 during the next year. By how much shouldnet operating income increase (or net loss decrease) assuming thatfixed expenses do not change? |
| 4. | Assume that theoperating results for last year were: |
| Sales | $ | 1,080,000 |
| Variable expenses | 540,000 | |
| Contribution margin | 540,000 | |
| Fixed expenses | 180,000 | |
| Netoperating income | $ | 360,000 |
| a. | Compute the degree of operating leverage at the current level ofsales. (Round your answer to 2 decimalplaces.) |
| Degree ofoperating leverage? |
| b. | The president expects sales to increase by 13% next year. Bywhat percentage should net operating income increase?(Round intermediate calculations to 2 decimal places andfinal answer to the nearest percentage.) Net operating income increases by what % |
| 5. | Refer to the original data. Assume that the company sold 42,000units last year. The sales manager is convinced that a 13%reduction in the selling price, combined with a $71,000 increase inadvertising, would increase annual unit sales by 50%. |
| a. | Prepare two contribution format income statements, one showingthe results of last yearâs operations and one showing the resultsof operations if these changes are made. (Do not roundintermediate calculations. Round your "Per unit" answers to 2decimal places.) |
| b. | Would yourecommend that the company do as the sales manager suggests? | ||||
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| 6. | Refer to the original data. Assume again that the company sold42,000 units last year. The president does not want to change theselling price. Instead, he wants to increase the sales commissionby $2.40 per unit. He thinks that this move, combined with someincrease in advertising, would double annual unit sales. By howmuch could advertising be increased with profits remainingunchanged? Do not prepare an income statement; use the incrementalanalysis approach. The amount by which advertising can be increasedby is...? |
Feather Friends, Inc., distributes a high-quality woodenbirdhouse that sells for $40 per unit. Variable expenses are $20.00per unit, and fixed expenses total $180,000 per year. |
| Required: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Answer the followingindependent questions: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1. | What is the product's CM ratio?
3. Due to an increase in demand, the company estimates thatsales will increase by $51,000 during the next year. By how muchshould net operating income increase (or net loss decrease)assuming that fixed expenses do not change?
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