4.

Assume that the operating results for last year were:

Sales	$	2,080,000
Variable expenses		1,040,000
Contribution margin		1,040,000
Fixed expenses		180,000
Net operating income	$	860,000

a.	Compute the degree of operating leverage at the current level of sales. (Round your answer to 2 decimal places.)

b.	The president expects sales to increase by 20% next year. By what percentage should net operating income increase? (Round intermediate calculations to 2 decimal places and final percentage answer to 2 decimal places, i.e. 22.47%)

5.	Refer to the original data. Assume that the company sold 37,500 units last year. The sales manager is convinced that a 13% reduction in the selling price, combined with a $70,000 increase in advertising, would increase annual unit sales by 50%.

a.

Prepare two contribution format income statements, one showing the results of last years operations and one showing the results of operations if these changes are made. (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places.)

5.	Refer to the original data. Assume that the company sold 37,500 units last year. The sales manager is convinced that a 13% reduction in the selling price, combined with a $70,000 increase in advertising, would increase annual unit sales by 50%.

a.	Prepare two contribution format income statements, one showing the results of last years operations and one showing the results of operations if these changes are made. (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places.)

5.	Refer to the original data. Assume that the company sold 37,500 units last year. The sales manager is convinced that a 13% reduction in the selling price, combined with a $70,000 increase in advertising, would increase annual unit sales by 50%.

a.

Prepare two contribution format income statements, one showing the results of last years operations and one showing the results of operations if these changes are made. (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places.)

Feather Friends, Inc.,
Contribution Income Statement
	Last Year		Proposed
	37,500	units		units
	Total	Per Unit	Total	Per Unit
	0	0.00	0	0.00
	$0		$0