Question
Carver Company produces a product that sells for $30. Variable manufacturing costs are $15 per unit. Fixed manufacturing costs are $5 per unit based on
Carver Company produces a product that sells for $30. Variable manufacturing costs are $15 per unit. Fixed manufacturing costs are $5 per unit based on the current level of activity, and fixed selling and administrative costs are $4 per unit. A selling commission of 10% of the selling price is paid on each unit sold. a. What is the contribution margin per unit? b. What is Carver's Degree of Operating Leverage? c. By how much would sales have to increase to yield a 30% increase in operating income? d. Assume that Carver has been selling 10,000 units per month, what is its operating income? e. Based on information in (c) assume that Carver wishes to increases its monthly operating income by $100,000. How many more units must it sell assuming fixed costs do not change
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