5 6 Blue company has prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 to 1,500 units): 7 Sales Variable expenses 9 Contribution margin $ 20,000 12,000 8,000 NOTE: Use the amounts in the original fact pattern to the left as your basis for the questions below. 10 Fixed expenses 6,000 11 Net operating income $ 2,000 12 13 Questions: 14 15 1. What is the contribution margin per unit? 16 2. What is the contribution margin ratio? 17 3. What is the variable expense ratio? 18 4. If sales increase to 1,001 units, what would be the increase in net operating income? 19 5. If sales decline to 900 units, what would be the net operating income? 20 6. If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income? 21 7. If the variable cost per unit increases by $1, spending on advertising increases by $1,500, and unit sales incrase by 250 units, what would be the net operating income? 22 B. What is the break-even point in unit sales? 23 9. What is the break-even point in dollar sales? 24 10. How many units must be sold to achieve a target profit of $5,0007 25 11. What is the margin of safety in dollars? 26 12. What is the degree of operating leverage? A B C D E F G H 1 J 1. The contribution margin per unit is calculated as follows: 2. The contribution margin ratio is calculated as follows: 3. The variable expense ratio is calculated as follows: 4. The increase in net operating income is calculated as follows: K L M N 0 8. The Break-Even point in unit sales is calculated as follows: 9. The Break-Even point in dollar sales is calculated as follows: P 10. The number of units to achieve the target profit is calculated a 5. If sales decline to 900 units, the net perating income would be computed as follows: 11. The margin of safety in dollars is calculated as follows: 6. The new net operating income would be computed as follows: 7. The new net operating income would be computed as follows: 12. The degree of operating leverage is calculated as follows: