Chapter 5: Applying Excel 1 Chapter 5:Applying Excel 3 Data Unit sales 20,000 units 5 Selling price per unit 6 Variable expenses per unit 7 Fixed expenses S60 per unit S45 per unit S240,000 9 Enter a formula into each of the cells marked with a? below 0 Review Problem: CVP Relationships 2 Compute the CM ratio and variable expense ratio 13 Selling price per unit 4 Variable expenses per unit 5 Contribution margin per unit S60 per unit 45 per unit 17 CM ratio 8 Variable expense ratio 25% 75% 21 22 Compute the break-even Break-even in unit sales Break-even in dollar sales 16,000 units S960,000 Compute the margin of safety 5 Margin of safety in dollars 26 Margin of safety percentage S240,000 20 8 Compute the degree of operating leverage $1,200,000 900,000 00,000 240,000 Sales Variable expenses Contribution margin 2 Fixed expenses 3 Net operating income 34 5.00 35 36 Degree of operating leverage 2. Change all of the numbers in the data area of your worksheet so that it looks like this 1 Chapter 5: Applying Excel 2 3 Data 50,000 units 4 Unit sales Selling price per unit 6 Variable expenses per unit 10 per unit 7 per unit 5 7 Fixed expenses S 135,000 If your formulas are correct, you should get the correct answers to the following questions (a) What is the break-even in dollar sales? Answer is complete and correct. 450,000 even (b) What is the margin of safety percentage? Answer is complete and correct 10.96 (c) What is the degree of operating leverage? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. .70 3. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%. Answer is complete but not entirely correct 4. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20% so that the Data area looks like this 1 Chapter 5: Applying Excel 2 3 Data 4 Unit sales 5 Selling price per unit 60,000 units 10 per unit 7 per unit 6 Variable expenses per unit 7 Fixed expenses S 135,000 (a) What is net operating income? (Negative amount should be indicated by a minus sign. Answer is complete but not entirely correct. oper (40,500) (b) By what percentage did the net operating income increase? 3Answer is complete but not entirely correct operating 5. Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930s. The retro-look cycle would be sold for $19,000 and at that price Thad estimates 700 units would be sold each year. The variable cost to produce and sell the cycles would be $13,300 per unit. The annual fixed cost would be $2,992,500 a. What is the break-even in unit sales? Answer is complete but not entirely correct. -even 5,000 b. What is the margin of safety in dollars? 3Answer is complete but not entirely correct. ety 450,000 C. What is the degree of operating leverage? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Thad is worried about the selling price. Rumors are circulating that other retro brands of cycles may be revived. If so, the selling price for the Western Hombre would have to be reduced to $15,300 to compete effectively. In that event, Thad would also reduce fixed expenses to $2,334,500 by reducing advertising expenses, but he still hopes to sell 700 units per year d. What would the net operating income be in this situation? (Negative amount should be indicated by a minus sign.) Answer is complete but not entirely correct