1 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: 1.66 points Sales $1,000,000 Variable expenses 500,000 Contribution 500,000 margin Fixed expenses 180,000 Net operating $ 320,000 income eBook Print Required: Answer each question independently based on the original data: Reference 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. Assume this year's unit sales and total sales increase by 41,000 units and $1,640,000, respectively. If the fixed expenses do not change, how much will net operating income increase? 4-a. What is the degree of operating leverage based on last year's sales? 4-b. Assume the president expects this year's unit sales to increase by 11%. 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 10% reduction in the selling price, combined with a $71,000 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 $1.80 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's unit sales by 25%. How much could the president increase this year's advertising expense and still earn the same $320,000 net operating income as last year? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 3 Req 4A Req 4B Req 5A Req 5B Reg 6 The sales manager is convinced that a 10% reduction in the selling price, combined with a $71,000 increase in advertising, would increase this year's unit sales by 25%. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year? (Negative amounts should be input with a minus sign.) Show less Increase (decrease) to net operating income 2 Part 1 of 5 Required information [The following information applies to the questions displayed below.) 1.66 points Maria Chavez owns a catering company that serves food and beverages at parties and business functions. Chavez's business is seasonal, with a heavy schedule during the summer months and holidays and a lighter schedule at other times. One of the major events Chavez's customers request is a cocktail party. She offers a standard cocktail party and has estimated the cost per guest as follows: eBook $16.00 5.00 Print Food and beverages Labor (0.5 hour @ $10.00/hr.) Overhead (0.5 hour @ $11.82/hr.) Total cost per guest 5.91 $26.91 Reference The standard cocktail party lasts three hours and Chavez hires one worker for every six guests, so that works out to one-half hour of labor per guest. These workers are hired only as needed and are paid only for the hours they actually work. When bidding on cocktail parties, Chavez adds a 14% markup to yield a price of about $31 per guest. She is confident about her estimates of the costs of food and beverages and labor but is not as comfortable with the estimate of overhead cost. The $11.82 overhead cost per labor-hour was determined by dividing total overhead expenses for the last 12 months by total labor-hours for the same period. Monthly data concerning overhead costs and labor-hours follow: Labor- Month Hours January 2,200 February 2,500 March 2,700 April 3,900 May 4,200 June 5,200 July 6, 200 August 7,200 September 6, 700 October November 3,800 December 6,200 Total 55,000 Overhead Expenses $ 42,000 46,000 47,000 51,000 54,000 58,000 61,000 64,000 62,000 55,000 51,000 59,000 $650,000 4,200 Chavez has received a request to bid on a 160-guest fundraising cocktail party to be given next month by an important local charity. (The party would last the usual three hours.) She would like to win this contract because the guest list for this charity event includes many prominent individuals that she would like to secure as future clients. Maria is confident that these potential customers would be favorably impressed by her company's services at the charity event. Required: 1. Prepare a scattergraph plot that puts labor-hours on the X-axis and overhead expenses on the Y-axis. What insights are revealed by your scattergraph? Instructions: 1. On the graph below, use the point tool (January) to plot the labor-hours on the horizontal axis and overhead expenses on the vertical axis. 2. Repeat the same process for the plotter tools (February to December). 3. To enter exact coordinates, click on the point and enter the values of x and y. 4. To remove a point from the graph, click on the point and select delete option. Overhead expense 90000 Tools 80000 70000 January February 60000 50000 March April 40000 30000 May June 20000 10000 a 0 1000 2000 3000 4000 5000 6000 7000 8000 Labor Hours 3 Part 2 of 5 Required information [The following information applies to the questions displayed below.) Maria Chavez owns a catering company that serves food and beverages at parties and business functions. Chavez's business is seasonal, with a heavy schedule during summer months and holidays and a lighter schedule at other times. 1.66 points One of the major events Chavez's customers request is a cocktail party. She offers a standard cocktail party and has estimated the cost per guest as follows: eBook $16.00 5.00 Food and beverages Labor (0.5 hour @ $10.00/hr.) Overhead (0.5 hour @ $11.82/hr.) Total cost per guest Print 5.91 $26.91 Reference The standard cocktail party lasts three hours and Chavez hires one worker for every six guests, so that works out to one-half hour of labor per guest. These workers are hired only as needed and are paid only for the hours they actually work. When bidding on cocktail parties, Chavez adds a 14% markup to yield a price of about $31 per guest. She is confident about her estimates of the costs of food and beverages and labor but is not as comfortable with the estimate of overhead cost. The $11.82 overhead cost per labor-hour was determined by dividing total overhead expenses for the last 12 months by total labor-hours for the same period. Monthly data concerning overhead costs and labor-hours follow: Month January Labor- Overhead Hours Expenses 2,200 $ 42,000 February 2,500 46,000 March 2,700 47,000 April 3,900 51,000 May 4,200 54,000 June 5,200 58,000 July 6,200 61,000 August 7,200 64,000 September 6,700 62,000 October 4,200 55,000 November 3,800 51,000 December 6, 200 59,000 Total 55,000 $650,000 Chavez has received a request to bid on a 160-guest fundraising cocktail party to be given next month by an important local charity. (The party would last the usual three hours.) She would like to win this contract because e the guest list for this charity event includes many prominent individuals that she would like to secure as future clients. Maria is confident that these potential customers would be favorably impressed by her company's services at the charity event. 2-a. Use the least-squares regression method to estimate the fixed and variable components of overhead expenses. 2-b. Express these estimates in the form Y = a +bX. Complete this question by entering your answers in the tabs below. Req 2A Req 2B Express these estimates in the form Y = a +bX. (Round the Variable cost to 2 decimal places and Fixed Cost to the nearest whole dollar amount.) Y=