Question
Danas Ribbon World makes award rosettes. Following is information about the company: Variable cost per rosette $ 1.40 Sales price per rosette 4.00 Total fixed
Danas Ribbon World makes award rosettes. Following is information about the company:
Variable cost per rosette | $ | 1.40 |
Sales price per rosette | 4.00 | |
Total fixed costs per month | 1300.00 | |
Required: 1. Suppose Danas would like to generate a profit of $900. Determine how many rosettes it must sell to achieve this target profit. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.) 2. If Danas sells 850 rosettes, compute its margin of safety in units, in sales dollars, and as a percentage of sales. (Round your Margin of Safety percentage to two decimal places (i.e. .1234 should be entered as 12.34%). 3. Calculate Danas degree of operating leverage if it sells 850 rosettes. (Round your intermediate calculations to 2 decimal places and final answer to 4 decimal places.) 4. Using the degree of operating leverage, calculate the change in Danas profit if unit sales drop to 680 units. Confirm this by preparing a new contribution margin income statement. (Round your intermediate calculations to 4 decimal places and final answer to 2 decimal places. (i.e. .1234 should be entered as 12.34%.))
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