6. Management is currently in contract negotiations with the labour union. If the negotiations fail, direct labour costs will increase by 10%, and fixed costs will increase by $28,500 per month. If these costs increase, how many units will the company have to sell each month to break even? 7. Return to the original data for this question and the remaining questions. What is the company's current operating leverage factor, rounded to two decimals? 8. If sales volume increases by 5%, by what percentage will operating income increase? 9. What is the firm's current margin of safety in sales dollars? What is its margin of safety as a percentage of sales? 10. Say Tech World adds a second line of flash drive (2GB rather than 1GB). A 2GB flash drive will sell for $45 and have variable cost per unit of $21 per unit. The expected sales mix is four small flash drives for each large flash drive. Given this sales mix, how many of each type of flash drive will Tech World need to sell to reach its target monthly profit of $260,000? Is this volume higher or lower than previously needed (in Requirement 5) to achieve the same target profit? Why? Sales price per unit (currently monthly sales volume is 120,000 units).... $ $ 20.00 Variable costs per unit: Direct materials 6.00 Direct labour... 7.00 Variable manufacturing overhead 1.80 Variable selling and administrative expenses 1.20 Monthly fixed expenses: Fixed manufacturing overhead 182,000 Fixed selling and administrative expenses 267,000 Requirement 6. Management is currently in contract negotiations with the labour union. If the negotiations fail, direct labour costs will increase by 10%, and fixed costs will increase by $28,500 per month. If these costs increase, how many units will the company have to sell each month to break even? (Round your answer up to the nearest whole number.) The new break-even point is units. Requirement 7. Return to the original data for this question and the remaining questions. What is the company's current operating leverage factor (round to two decimals)? Begin by identifying the formula. Contribution margin 1 Operating income Operating leverage factor The operating leverage factor is - (Round your answer to two decimal places.) Requirement 8. If sales volume increases by 5%, by what percentage will operating income increase? (Round the percentage to one decimal place.) Using the operating leverage factor method, the operating income will increase by [%. Requirement 9. What is the firm's current margin of safety in sales dollars? What is its margin of safety as a percentage of sales? Begin by identifying the formula to calculate the firm's current margin of safety in sales dollars. Margin of safety in dollars The current margin of safety is $ What is its margin of safety as a percentage of sales? Begin by identifying the formula. Margin of safety as a percentage x 100% = The margin of safety as a percentage of sales is %. (Round the percentage to the nearest whole percent.) Requirement 10. Say Tech World adds a second line of flash drives (2GB rather than 1GB). The 2GB flash drive will sell for $45 and have variable cost per unit of $21 per unit. The expected sales mix is four small flash drives Requirement 10. Say Tech World adds a second line of flash drives (2GB rather than 1GB). The 2GB flash drive will sell for $45 and have variable cost per unit of $21 per unit. The expected sales mix is four small flash drives for each large flash drive. Given this sales mix, how many of each type of flash drive will Tech World need to sell to reach its target monthly profit of $260,000? Is this volume higher or lower than previously needed (in Requirement 5) to achieve the same target profit? Why? Begin by computing the weighted average contribution margin per unit. First identify the formula labels, and then complete the calculations step by step. 1GB 2GB Total 20 Less: Sales price per unit Variable cost per unit Contribution margin per unit Sales mix Contribution margin Weighted average contribution margin per unit Given this sales mix, how many of each type of flash drive will Tech World need to sell to reach its target monthly profit of $260,000? The new target sales in units is Tech World will need to sell units of the smaller drives and units of the larger units. Is this volume higher or lower than previously needed (in Requirement 5) to achieve the same target profit? Why? before because now the company is selling a product with The target sales is unit contribution margin