Question
BGB Tuna Processing manufactures and sells canned tuna to restaurants. Variable cost per can amounts to $6 and the selling price of each can is
BGB Tuna Processing manufactures and sells canned tuna to restaurants. Variable cost per can amounts to $6 and the selling price of each can is $25. Total annual fixed costs amount to $14,630,000. Sales are estimated to amount to 1,470,000 cans of tuna.
a) Calculate the following values. Gross Sales: $ Total Variable Costs: $ Contribution Margin: $ Operating Profit: $ b) If the company sells according to their estimates, what is the degree of operating leverage? The break-even point (in units)? Round the degree of operating leverage to 2 decimal places. Degree of operating leverage: Break-even Point (units): c) If the company increases the sales volume (cans) by 32%, by what percentage will operating profit increase? By what dollar amount will operating income increase? Use the degree of operating leverage. Round the percentage increase to 2 decimal places. Percentage Increase:% Dollar Increase: $ d) If the company spends $28,000 as additional advertising expense (fixed cost), sales volume will increase by 13%. Determine the new operating leverage and the new break-even point in units. Round the degree of operating leverage to 2 decimal places. Degree of operating leverage: Break-even point (units):
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