Chapter 5: Vader Collectibles, Inc. Graded Homework Assignment Fall 2019 When Darth Vader isn't too busy ridding the galaxy of Collectibles Ipe van too busy ridding the galaxy of rebel scum he enjoys running his own business, Vader Collectibles, Inc. Vader Collectibles sells premium miniature Sud ature superlasers with enough ectibles sells premium quality model Death Stars. The model Death Stars include to destroy the four Rebel Trooper action figures the purchase. destroy the four Rebel Trooper action figures that are included with Collectibles, Inc. has never been profitable. Emp tely. Darth Vader isn't as good at running a business as he is at fighting rebels, and Vader profitable business has never been profitable Emperor Palpatine embarrassed that his apprentice cant runa table business, recently made Darth Vader take a managerial accounting class Darth Vader his new skills to make his business more successful and impress his master based on what he learned in class. Darth Vader has prepared a contribution margin income statement to current sales volume of 19,000 units accounting class. Darth Vader is eager to use Sales Variable Expenses Contribution Margin Fixed Expenses Net Operating Income Total $ 1,805,000 1,335,700 469,300 520.000 $ (50,700) Darth Vader believes that if he were to run a fantastic ad campaign, he could sell more units and finally earn a profit. He wants to record a commercial that would show the real Death Star blowing up a planet and then feature Darth Vader himself blowing up various action figures using the model Death Star Darth Vader estimates that this advertising campaign would cost $25.000 and would generate additional sales of 5,000 units Requirements: Using the information presented above, perform the following: 1. 2 3. Expand Darth Vader's contribution margin income statement to include the sales, variable expenses, and contribution margin information on a per-unit and percent of sales basis Calculate Vader Collectibles' break-even point in unit sales and in dollar sales Prepare a contribution margin income statement that would result from the assumptions Darth Vader is making about his proposed advertising campaign Calculate Vader Collectibles' required sales in units in order to obtain a target profit. Calculate Vader Collectible's degree of operating leverage. Calculate how Vader Collectible's net operating income would change based on a percent change in sales 5. 6. Use the following information for Questions 4-6 Assume that after a few years, business is booming and Vader Collectibles has the following contribution margin income statement: Sales Level in Units 77,000 Per Unit % of Sales $90 Sales Variable Expenses Contribution Margin Fixed Expenses Net Operating Income Total $ 6,930,000 4.851,000 2,079,000 1 105.000 $ 974,000 100% 70% 30% $27 4. if Darth Vader wanted to earn a target profit of $750.000, what would Vader Collectible's sales need to be in units? Round the target sales in units to the nearest full unit. 15 Calculation . Target sales in units 1 .1 Answer 68,104 units 2 5. What is Vader Collectible's degree of operating leverage? Carry your calculation to three decimal points. Answer Degree of Operating Leverage Operating 1,019,000 Calculation 2,0 19.000 14.000 6. Assume that Vader's degree of operating leverage is 3.10. If Vader Collectible's sales increased by 5%, by what percentage would net operating income change? Carry your calculation to one decimal point. Calculation Answer Percentage change in net operating income
