Download the Applying Excel form and enter formulas in all cells that contain question marks. For example, in cell B13 enter the formula "=85". After entering formulas in all of the cells that contained question marks, verify that the dollar amounts match the example in the text. Check your worksheet by changing the fixed expenses to $270,000. If your worksheet is operating properly, the degree of operating leverage should be 10. If you do not get this answer, find the errors in your worksheet and correct them. Save your completed Applying Excel form to your computer and then upload it here by clicking "Browse." Next, click "Save." You will use this worksheet to answer the questions in Part 2. Chapter 6: Applying Excel Data Unit sales 20000 units Selling price per unit $60 per Variable expenses per unit $45 per Fixed expenses $240000 Enter a formula into each of the cells marked with a ? below Review Problem: CVP Relationships Compute the CM ratio and variable expense ratio Selling price per unit ? per Variable expenses per unit ? per Contrihtion marain ner nit ? per CM ratio ? Variable expense ratio Compute the break-even Break-even in unit sales ? units Break-even in dollar sales Compute the margin of safety Margin of safety in dollars Margin of safety percentage ? Compute the degree of oneratina leverace Iviargn o satety percentage Compute the degree of operating leverage Sales Variable expenses Contribution margin Fixed expenses Net operating income ???? Degree of operating leverage ? 2. Change all of the numbers in the data area of your worksheet so that it looks like this: If your formulas are correct, you should get the correct answers to the following questions. (a) What is the break-even in dollar sales? (b) What is the margin of safety percentage? (c) What is the degree of operating leverage? (Round your answer to 2 decimal places.) 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%. 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: (a) What is net operating income? (Negative amount should be indicated by a minus sign.) (b) By what percentage did the net operating income increase? 5. Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930 s. The retro-look cycle would be sold for $15,000 and at that price, Thad estimates 700 units would be sold each year. The variable cost to produce and sell the cycles would be $10,500 per unit. The annual fixed cost would be $2,520,000 a. What is the break-even in unit sales? b. What is the margin of safety in dollars? c. What is the degree of operating leverage? (Round your answer to 2 decimal places.) 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 $12,500 to compete effectively. In that event, Thad would also reduce fixed expenses to $2,092,000 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.) c. What is the degree of operating leverage? (Round your answer to 2 decimal places.) 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 $12,500 to compete effectively. In that event, Thad would also reduce fixed expenses to $2,092,000 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.)
