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Blue company has prepared the following contribution format income statement basedon a sales volume of 1,000 units (the relevant range of production is 500 to
Blue company has prepared the following contribution format income statement basedon a sales volume of 1,000 units (the relevant range of production is 500 to 1,500 units): | ||||||||
Sales | $ 20,000 | |||||||
Variable expenses | 12,000 | |||||||
Contribution margin | 8,000 | |||||||
Fixed expenses | 6,000 | |||||||
Net operating income | $ 2,000 | |||||||
Questions: |
1. What is the contribution margin per unit? Calculated as follows | ||||||||||||||
2. What is the contribution margin ratio? Calculated as follows | ||||||||||||||
3. What is the variable expense ratio? Calculated as follows | ||||||||||||||
4. If sales increase to 1,001 units, what would be the increase in net operating income? Calculated as follows | ||||||||||||||
5. If sales decline to 900 units, what would be the net operating income? Computed as follows | ||||||||||||||
6. If the selling price increases by $2 per unit and thes ales volume decreases by 100 units, what would be the net operating income? Computed as follows | ||||||||||||||
7. If the variable cost per unit increases by $1, spending on advertising incrases by $1,500, and unit sales incrase by 250 units, what would be the net operating income? Computed as follows | ||||||||||||||
8. What is the break-even point in unit sales? Calculated as follows | ||||||||||||||
9. What is the break-even point in dollar sales? Calculated as follows | ||||||||||||||
10. How many units must be sold to achieve a target profit of $5,000? Calculated as follows | ||||||||||||||
11. What is the margin of safety in dollars? Calculated as follows | ||||||||||||||
12. What is the degree of operating leverage? Calculated as follows |
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