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rates were for The cel workshoot for that show is to be dech oben Var Company had the word in this for you Post connect CHAPTER 6: APPLYING EXC Chapter Applying Excel LEL7 LOS 2 > Dato 4 Units 20.000 We per 145 per 245.000 3 Selling price per un Vanable expenses per Fised expenses Enter a forma independented with the 10 Review Problem: CVP Relationships 13 Computo de CM atlo and variable repente radio 13 Selling price per unit 34 Variable expenses permit 35 Contribution harga per unit 15 17 CM ratio per 2. pert 7 23 2 27 18 Variable expense malo 20 Compute the break even 21 Break-even in unit Sales 22 Break-even in dollar sales 26 Compute the margin of safety 25 Margin of safety in dollars 26 Margin of safety percentage 25 Compute the degree of operating leverage 30 Variable expenses 31 Contribution margin 32 Fixed expenses 33 Net operating income 35 Degree of operating leverage 2 7 29 Sales ? ? 7 ? 2 36 ? Chapter Form You should proceed to the requirements below enly after completing your worksheet. Required: or why not? 1. Check your worksheet by changing the fixed expenses to $270.000. If your worksheet is operating properly, the degree of operating leverage should be 10. If you do not get this answer. Find the error in your worksheet and correct them. How much is the maryin al safety percentage? Did it change? Wilty 2. Enter the following data from a different company into your worksheet: Unit sales 10,000 Selling price per unit Variable expenses per unit Fixed expenses. $420,000 $120 $72 What is the margin of safety percentage? What is the degree of operating leverage? 3. Using the degree of operating leverage and without changing anything in your worksheet. calculate the percentage change in net operating income if unit sales increase by 15%. 4. Confirm the calculations you made in part (3) above by increasing the unit sales in your worksheet by 15%. What is the new net operating income and by what percentage did it increase? 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 $10,000 and at that price. Thad estimates that he could sell 600 units each year. The variable cost to produce and sell the cycles would be $7,500 per unit. The annual fixed cost would be $1,200,000. a. Using your worksheet, what would be the unit sales to break even the margin of safety in dollars. and the degree of operating leverage? b. 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 $9,000 to compete effectively. In that event, Thad also would reduce fixed expenses by $300,000 by reducing advertising expenses, but he still hopes to sell 600 units per year. Do you think this is a good plan? Explain. Also, explain the degree of operating leverage that appears on your worksheet rates were for The cel workshoot for that show is to be dech oben Var Company had the word in this for you Post connect CHAPTER 6: APPLYING EXC Chapter Applying Excel LEL7 LOS 2 > Dato 4 Units 20.000 We per 145 per 245.000 3 Selling price per un Vanable expenses per Fised expenses Enter a forma independented with the 10 Review Problem: CVP Relationships 13 Computo de CM atlo and variable repente radio 13 Selling price per unit 34 Variable expenses permit 35 Contribution harga per unit 15 17 CM ratio per 2. pert 7 23 2 27 18 Variable expense malo 20 Compute the break even 21 Break-even in unit Sales 22 Break-even in dollar sales 26 Compute the margin of safety 25 Margin of safety in dollars 26 Margin of safety percentage 25 Compute the degree of operating leverage 30 Variable expenses 31 Contribution margin 32 Fixed expenses 33 Net operating income 35 Degree of operating leverage 2 7 29 Sales ? ? 7 ? 2 36 ? Chapter Form You should proceed to the requirements below enly after completing your worksheet. Required: or why not? 1. Check your worksheet by changing the fixed expenses to $270.000. If your worksheet is operating properly, the degree of operating leverage should be 10. If you do not get this answer. Find the error in your worksheet and correct them. How much is the maryin al safety percentage? Did it change? Wilty 2. Enter the following data from a different company into your worksheet: Unit sales 10,000 Selling price per unit Variable expenses per unit Fixed expenses. $420,000 $120 $72 What is the margin of safety percentage? What is the degree of operating leverage? 3. Using the degree of operating leverage and without changing anything in your worksheet. calculate the percentage change in net operating income if unit sales increase by 15%. 4. Confirm the calculations you made in part (3) above by increasing the unit sales in your worksheet by 15%. What is the new net operating income and by what percentage did it increase? 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 $10,000 and at that price. Thad estimates that he could sell 600 units each year. The variable cost to produce and sell the cycles would be $7,500 per unit. The annual fixed cost would be $1,200,000. a. Using your worksheet, what would be the unit sales to break even the margin of safety in dollars. and the degree of operating leverage? b. 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 $9,000 to compete effectively. In that event, Thad also would reduce fixed expenses by $300,000 by reducing advertising expenses, but he still hopes to sell 600 units per year. Do you think this is a good plan? Explain. Also, explain the degree of operating leverage that appears on your worksheet
