1

The CVP income statements shown below are available for Sandhill Co. and Wildhorse Co.:

		Sandhill Co.		Wildhorse Co.
Sales revenue		$ 768,000		$ 768,000
Variable costs		480,000		268,800
Contribution margin		288,000		499,200
Fixed costs		192,000		403,200
Operating income		$ 96,000		$ 96,000

(a)

Calculate each companys degree of operating leverage. (Round answers to 4 decimal places, e.g. 1.2531.)

		Degree of operating leverage
Sandhill		enter an appropriate value rounded to 4 decimal places
Wildhorse		enter an appropriate value rounded to 4 decimal places

Determine which companys cost structure makes it more sensitive to changes in its sales volume. select a company WildhorseSandhill

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2

Sheridan Incorporated makes basketball nets. Its sales mix and contribution margin information per unit are as follows:

		Sales Mix		Contribution Margin
Bryant		10 %		$85
James		50 %		$73
Jordan		40 %		$58

It has fixed costs of $2,168,760.

(a)

Determine the weighted-average unit contribution margin. (Round answer to 2 decimal places, e.g. 15.25.)

Weighted-average unit contribution margin

$enter the weighted-average unit contribution margin in dollars rounded to 2 decimal places

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Wildhorse Manufacturing Ltd. has provided you with the following CVP income statement:

Sales ( 5,500 units)		$ 1,100,000		$ 200	per unit
Variable costs		748,000		136	per unit
Contribution margin		352,000		$ 64	per unit
Fixed costs		288,000
Operating income		$ 64,000

Management is considering the following course of action to increase operating income: reduce the selling price by 20%, with no changes to unit variable costs or fixed costs. Management feels that this change will increase unit sales by 30%.

(a)

Calculate the break-even point in units and sales dollars with no change in sales. (Round contribution margin ratio to 5 decimal places, e.g. 15.22456%. Round units to 0 decimal places, e.g. 5,275 and dollar amount to 2 decimal places, e.g. 15.25.)

		In units		In dollars
Break-even point		enter a number of units rounded to 0 decimal places		$ enter a dollar amount rounded to 2 decimal places

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Oriole Incorporated makes track suits that sell for $50 each. Actual sales are $685,000. Management estimates that fixed costs will total $219,200 and variable costs will be $30 per unit this coming year.

(a)

Calculate the break-even point in sales dollars using the contribution margin ratio. (Round contribution margin ratio to 6 decimal places, e.g. 15.296465% and final answer to 0 decimal places, e.g. 125.)

Break-even point in dollars

$enter the break-even point in dollars rounded to 0 decimal places