ECON 1010 Study Guide - Midterm Guide: Operating Leverage, Biasing, Earnings Before Interest And Taxes

• School: York University
• Department: Economics
• Course: ECON 1010
• Professor: M U Z P A R K H A N I

Document Summary

Problem 7-18 (60 minutes: the cm ratio is 60%: =,000 sales: ,000 increased sales 60% cm ratio = ,000 increased contribution margin. Since fixed costs will not change, operating income should also increase by ,000. 4 16% = 64% increase in operating income. In dollars, this increase would be 64% ,000 = ,600. * 23,000 units 1. 3 = 29,900 units. ** per unit (1 0. 12) = . 40 per unit. No, the changes should not be made since operating income decreases: expected total contribution margin: 23,000 units 150% per unit* Incremental contribution margin, and the amount by which advertising can be increased with operating income remaining unchanged Problem 7-19 (60 minutes: the cm ratio is 30%. 15,000 units per unit = ,000 in sales. ,000 increased sales 30% cm ratio: incremental contribution margin: Since the company presently has a loss of ,000 per month, if the.