7-1A CVP Analysis, Margin of Safety, Degree of Operating Leverage

Charming Clothiers manufactures neckties and bow ties. The company has the following information:

The companys sales price is $30 per unit. The variable costs of producing bowties is $18 per unit. The company expects to have fixed costs of $60,000 next year. The company expects to sell 8,000 bowties next year. Assume no taxes.

Calculate the breakeven point in units.

Calculate the breakeven point in SALES dollars.

How many units must the company sell to reach a target profit of $50,000?

Prepare a budgeted contribution format income statement.

Compute the margin of safety in both dollar and percentage terms.

Compute the degree of operating leverage.

If sales increase by 20% in the following year, how much would net income increase (use the degree of operating leverage to compute your answer).

Use the options below to answer the above:

Using 7-1a from Tony Bell's workbook, complete Step 3 - using the Contribution Margin (CM) Income Statement from Step 1, calculate the following: c) Total units sold to achieve a NIBT of $50,000. d) Total Sales Revenues to achieve a NIBT of $50,000. What is the Sales Revenues in Total $(T$) to achieve a NIBT of $50,000 ? How many units must be sold to make a Net Income Before Taxes (NIBT) of $50,000 ? Choose... Choose... 9,167 units $275,000 $110,000 9,166 units $60,000 9,166.67 units $90,000 $275,010