6. Which is the better deal for The Rock? Right now, The Rock is selling fanny packs at $50 / unit and sells 425,000 units. If he reduces his price to $40, he expects to sell 500,000 fanny packs. If he raises his price to $60, he expects to sell 375,000 fanny packs. Should he raise or lower his price? 7. If the Degree of Operating Leverage is 4, what is the Margin of Safety? 8. If the Margin of Safety is .15, what is the Degree of Operating Leverage? 9. Why is it important to know what they degree of operating leverage and margin of safety is? What do these tell us about CVP Analysis? 10. The Rock is so impressed with your accounting ability, he has decided to branch out and do fanny packs for kids that have gummy bears and pizza on them. These will have a CM of $5 a unit and a selling price of $10. The original 100% leather bags have a CM of $23 and a price of $50. A. Which of these has the higher CM per unit? B. If The Rock expects to sell 1 original and 2 kid packs in the "basket", how many baskets does he need to sell to make a 25% profit margin on revenue. Fixed Costs are $500,000. The Rock needs your help! Retro is in and The Rock wants to be the first to cash in on a great idea! He has decided to start selling 100% leather fanny packs as they looked so amazing when he wore them back in the 90's. He is confident with his endorsement; this will be a successful business venture. What is the B-E amount in Sales Units and Sales Dollars if the costs to produce these high quality fanny packs are as follows: Variable costs: High quality leather, zippers, etc. per unit = $5.00 Labor and Variable OH per unit = $4.00 Fixed Costs per year = $400,000 Sales Price per unit = $35.00 1. What is the Contribution Margin Per Unit? 2. How do you solve for B-E in Sales Units? 3. How do you solve for B-E in Sales Dollars? Now The Rock knows you are an accounting superstar. He is almost willing to say you are the sexiest accountant in the world. Show him just how amazing you are at accounting. He wants some guidance. 4. The Rock wants to make a pre-tax profit of $500,000. What number of fanny packs must he sell if he plans to sell them at $50 / unit? Prices for variable and fixed costs will remain the same as page 1? 5. If he wants to make an after-tax profit of $500,000 and the tax rate is 30%, what number of fanny packs must he sell if he plans to sell them at $50 / unit