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 bed-the Tuff-Pup. Fixed costs are $176,000 per year. The average price for the Tuff-Pup is $36, 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? 16,000 units 2. If Reagan wants to earn $61,600 in profit, how many Tuff-Pups must be sold? 21,600 units Prepare a variable-costing income statement to verify your answer. Reagan, Inc. Variable-Costing Income Statement Sales 777,600 Less: Variable cost 540,000 Contribution margin 237,600 Less: Fixed expenses 176,000 Operating income 61.600 C 3. Suppose that Reagan would like to lower the break-even units to 8,800. 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 8,800. If required, round your intermediate computations and final answer to the nearest cent. 4. What is Reagan's current contribution margin and operating income? Current contribution margin Current operating income Calculate the degree of operating leverage. Round your answer to three decimal places. 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"). % What would the new total operating income for next year be? Round your answer to the nearest dollar. 5. Reagan, Inc., has used data on the Tuff-Pup to answer a number of different questions. Identify the data analytic type (descriptive, diagnostic, predictive, or prescriptive) that Reagan used to answer these questions. (See Exhibits 2.5 and 2.6, for a review of data analytic types. Note: More than one analytic type might apply.) Descriptive analysis will help Reagan understand the break-even point and units needed to earn a target < 5. Reagan, Inc., has used data on the Tuff-Pup to answer a number of different questions. Identify the data analytic type (descriptive, diagnostic, predictive, or prescriptive) that Reagan used to answer these questions. (See Exhibits 2.5 and 2.6, for a review of data analytic types. Note: More than one analytic type might apply.) Descriptive profit. analysis will help Reagan understand the break-even point and units needed to earn a target Descriptive Descriptive analysis helps Reagan to understand what happens when variables are changed. analysis would be used if Reagan determines that a target profit must be earned and then uses the data to change price, variable cost, and fixed cost to achieve that profit. Data analytics would be used descriptively in Requirement 3 as Reagan decides to lower the break-even point and uses the analysis to determine why the breakeven is higher than desired.