1. Break-Even in Units, Target Income, New Unit Variable Cost, Degree of Operating Leverage, Percent Change in Operating Income

   Reagan, Inc., has developed a chew-proof dog bedthe Tuff-Pup. Fixed costs are $150,000 per year. The average price for the Tuff-Pup is $35, and the average variable cost is $25 per unit. Currently, Reagan produces and sells 20,000 Tuff-Pups annually.

   Required:

   1. How many Tuff-Pups must be sold to break even? fill in the blank abe17dfc6feafd3_1 units

   2. If Reagan wants to earn $65,000 in profit, how many Tuff-Pups must be sold? fill in the blank abe17dfc6feafd3_2 units

   Prepare a variable-costing income statement to verify your answer.

   Reagan, Inc. Variable-Costing Income Statement

   Contribution marginFixed expensesSalesVariable cost	$- Select -
   Less: Contribution marginLess: Fixed expensesLess: SalesLess: Variable cost	- Select -
   Contribution marginFixed expensesSalesVariable cost	$- Select -
   Less: Contribution marginLess: Fixed expensesLess: SalesLess: Variable cost	- Select -
   Contribution marginFixed expensesOperating incomeOperating loss	$- Select -

   3. Suppose that Reagan would like to lower the break-even units to 7,500. The company does not believe that the price or fixed cost can be changed. Calculate the new unit variable cost that would result in break-even units of 7,500. If required, round your intermediate computations and final answer to the nearest cent. $fill in the blank 568d39fcd06ff82_1

   4. What is Reagans current contribution margin and operating income?

   Current contribution margin	$fill in the blank 568d39fcd06ff82_2
   Current operating income	$fill in the blank 568d39fcd06ff82_3

   Calculate the degree of operating leverage. Round your answer to three decimal places. fill in the blank 568d39fcd06ff82_4

   If sales increased by 10 percent next year, what would the percent change in operating income be? Use your rounded answer to the question above in your computations, and round your final percentage answer to two decimal places (for example, 45.555% would be entered as "45.56"). fill in the blank 568d39fcd06ff82_5 %

   What would the new total operating income for next year be? Round your answer to the nearest dollar. $fill in the blank 568d39fcd06ff82_6

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