Dog Dandy distributes a dog collar made of wooden beads that sells for $40 per unit. Variable expenses are $20 per unit, and fixed expenses total $156,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Fixed expenses Operating income CM ratio Required: Answer each of the following independent questions based on the original data. 1. What is the product's CM ratio? % $520,000 260,000 Break-even point in dollar sales 260,000 156,000 $104,000 2. Use the CM ratio to determine the break-even point in dollar sales. Decrease in operating income 3. Assume this year's unit sales and total sales decrease by $53,000. If the fixed expenses do not change, how much will operating income decrease? 4. What is the degree of operating leverage based on last year's sales? (Round your answer to 1 decimal place.)

Dog Dandy distributes a dog collar made of wooden beads that sells for $40 per unit. Variable expenses ate $20 per unit, and fixed expenses total $156,000 per yeat its operating results for last year were as follows: Required: Answer each of the foliowing independent questions based on the orignal data 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales 3. Assume this years unit sales and total sales decrease by $53,000. If the fixed expenses do not change, how much will operating income decrease? 4. What is the degree of operating feverage based on last years sales? (Round your answer to 1 decimal place.) 4. What is the degree of operating leverage based on last year's sales? (Round your answer to 1 decimal place.) 5. Assume the this year's unit sales will decrease by 20% next year. Using the degree of operating leverage from last year, what percentage decrease in operating income will the company incur this year? 6-a. The sales manager is convinced that a 10% reduction in the selling price, combined with a $23,000 increase in advertising. wou increase this year's unit sales by 40%. If the sales manager is right, what would be this year's operating income if his ideas are implemented? 6-b. Do you recommend implementing the sales manager's suggestions? Yes No