1. Robbies Ribs has the following sales and cost information:

Average number of pounds sold per year - 39,750 Average selling price per pound of ribs - $11.50 Variable expenses per pound:

Raw material - $3.70

Variable labor and overhead - $3.20

Annual fixed costs:

Production expenses - $37,300

Selling & Administrative expenses $15,186

The companys tax rate is 30%. The companys costs have slowly been rising and profits rapidly falling. Robbie Shaw, company president, has asked your help in answering the following questions:

What is the contribution margin per pound of ribs? The contribution margin ratio?

What is the break-even point in pounds of ribs? In dollars?

How much revenue must be generated to produce $39,749 of pretax income? How many pounds of ribs would this level of revenue represent?

How much revenue must be generated to produce $24,500 after-tax income? How many pounds of ribs would this represent?

2. The following is financial information relative to two companies in the same industry:

Category	Alpha	Omega
Sales	$10,000,000	$10,000,000
Variable Cost	5,000,000	2,000,000
Contribution Margin	5,000,000	8,000,000
Fixed Costs	3,000,000	6,000,000
Operating Income	$2,000,000	$2,000,000

Calculate the operating leverage for each firm.

If sales increased 10% for each firm, the variable cost per unit did not change, and the fixed costs did not change, what would be the change in operating income?

If sales decreased 20% for each firm, the variable cost per unit did not change, and the fixed costs did not change, what would be the change in operating income?

Discuss the nuances of operating leverage and its relation to risk.

3. WaterSports USA sells three types of wake boards. Information relative to sales in units and dollars are given in the table below:

Sales Category	Wakeman	Jumper	Novice	Total
Sales in Units	1,000	5,000	2,000	8,000
Price per Unit	$200	$150	$100
Variable cost per Unit	$150	$100	$50

Fixed costs are projected to be $100,000. Carry all calculations to four decimal places.

Compute the contribution margin per unit.

Compute the weighted contribution margin.

Compute the break-even in total units.

Compute the break-even per product.

Discuss briefly the usefulness of the computation in the business world.