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1 Chapter 5: Applying Excel 2 3 Data 4 Unit sales 20,000 units 5 Selling price per unit $60 per unit 6 Variable expenses per
1 Chapter 5: Applying Excel 2 3 Data 4 Unit sales 20,000 units 5 Selling price per unit $60 per unit 6 Variable expenses per unit $45 per unit 7 Fixed expenses $240,000 8 9 Enter a formula into each of the cells marked with a ? below 10 Review Problem: CVP Relationships 11 12 Compute the CM ratio and variable expense ratio 13 Selling price per unit ? per unit 14 Variable expenses per unit ? per unit 15 Contribution margin per unit ? per unit 16 17 CM ratio ? 18 Variable expense ratio ? 19 20 Compute the break-even 21 Break-even in unit sales ? units 22 Break-even in dollar sales ? 23 24 Compute the margin of safety 25 Margin of safety in dollars ? 26 Margin of safety percentage ? 27 28 Compute the degree of operating leverage 29 Sales ? 30 Variable expenses ? 31 Contribution margin ? 32 Fixed expenses ? 33 Net operating income ? 34 35 Degree of operating leverage ? 36 37 4. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20% so that the Data area looks like this: A B 1 Chapter 5: Applying Excel 2 3 Data 4 5 Unit sales Selling price per unit Variable expenses per unit Fixed expenses 84,000 units $ 20 per unit $ 8 per unit $ 756,000 6 7 5. Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930s. The retro-look cycle would be sold for $17,000 and at that price, Thad estimates 100 units would be sold each year. The variable cost to produce and sell the cycles would be $12,750 per unit. The annual fixed cost would be $212,500. a. What is the break-even in unit sales? Answer is complete but not entirely correct. Break-even in unit sales 450 X b. What is the margin of safety in dollars? Margin of safety in dollars c. What is the degree of operating leverage? (Round your answer to 2 decimal places.) Degree of operating leverage Thad is worried about the selling price. Rumors are circulating that other retro brands of cycles may be revived. If so, the selling price for the Western Hombre would have to be reduced to $13,000 to compete effectively. In that event, Thad would also reduce fixed expenses to $164,500 by reducing advertising expenses, but he still hopes to sell 100 units per year. d. What would the net operating income be in this situation? (Negative amount should be indicated by a minus sign.) Net operating income (loss)
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