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4. Nanook Corporation's most recent income statement is given below Sales (9,000 units) $184,500 Less variable expenses (81.000) Contribution margin 103,500 Less fixed expenses 0.000
4. Nanook Corporation's most recent income statement is given below Sales (9,000 units) $184,500 Less variable expenses (81.000) Contribution margin 103,500 Less fixed expenses 0.000 Operating income $43.500 Required: Show your work! (15 points) . Compute contribution margin per unit $184 500-81,000 = 103.50D/4000 = $11.5 b. If sales are doubled total variable costs will equal 461,000 (2) -8 162,000 c. If sales are doubled total fixed costs will equal 2 40 000 d. If 20 more units are sold, profits will increase by 3115 (20) = 06230 e. Compute how many units must be sold to break even $60000/11.5 - 52164 f Compute how many units must be sold to achieve operating income of $60,000. 0.56 560000+60000= wabooo 103,500 264500 = 4 1800LD 1,56=214,285 8. Compute margin of safety in dollars and in percentage. Nanook wants to increase its margin of safety percentage to 45%. Will a 10% increase in sales price help Nanook achieve that desired percentage? h. Compute degree of operating leverage. Ir Nanook anticipates 30% increase in sales, what is the percentage increase in operating income? Use the calcat i Nanook wants to achieve operating income of $55.000 next year. Management is considering two different alternatives. Evaluate cach alternative separately Does either option meet or exceed Nanook's targeted operating income of $55,000 1. Spend $10,000 on advertising, which should result in a 20% increase in sales 2. Increase the selling price to $22 and decrease variable costs to $8.50. This alternative would result in a 5% decrease in sales. 6
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