347 Chapter 7 Cost-Volute Proit Consolidated Indusaies will purchase the valve bor $50 and selt i for $90 Andicipaied the first year i 6,000ns Required 1. Compate the break even point for Plan A and Plan 2What is meant by the term openating ieverage? 3. Analyae the cost structures of both plans at the anticipated demand of 6,000 nits Which of the two plans has a higher operating leverage factor? 4. Assume that a geseral ecenomic downturn eccurred during year 2, with prodact demand talling froe f Consolidated had 6,000 to 5,000 units Deermine the percentage decrease in company ne incorne i adopted Plan A S Repeat roqaisement (4) for Plan B.Compare Plan A and Plan B, and explain a major factor that undeelies any resulting differences &. Briefly discuss the lkely poofitability impact of an economic recession for highly autoosated man ufactrers. What can you say about the risk associated with these firms -" Problem 7-40 Basic CVP Relationships 00 1,2,4 Serendipity Sound, Inc manfactures and sells compact dises. Price and cost data are as follows 25.00 Selting price per unit package af tws CO rable costs pr Direct naerla Dnect liba 5.00 3 00 Manufacturing overbead Selling experses 1.30 1980 $ 192,000 Total warable costs per unt Anual fad costs Manuractuing overhead Seling and administrate 276,000 5 468,000 3,000,000 Forecasted annual saies volune 0120,000 unt Required 1. What is Serendipity Sound's break-even poist in units? 2. What is the company's break-even point in sales doillars? 3. How many units would Serendipity Sound have to sell in order to earn operating income of 5260,000? 4. What is the firm's margin of safety? 5. Management estimates that direct-labor costs will increase by 8 percent next year How many units will the company have to sell next year to reach its break-even point? 6. If the company's direct-labor costs do increase by 8 percent, what selling price per unit of product must it charge to maintain the same contribution-margin ratio? CMA adepted Problem 7-41 Athletico, Lida manufactures athletic shocs. The compaay's projected operating income for the coming CVP Graph, Cost Structure: year, based on sales of 160,000 units, is as follows Saes Oparating expenses Operating Leverage $18,000,000 LO 2,3, 4,8 $4,020,000 Variable expenses Foad expenses Total expenses 10,000 000 6,000,000 Operating income