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Dreamer Company has provided the following data from the last year: Required: Sales (9,000 units) Variable expenses Contribution margin Fixed expenses Operating income 1.
Dreamer Company has provided the following data from the last year: Required: Sales (9,000 units) Variable expenses Contribution margin Fixed expenses Operating income 1. Calculate the break-even sales in dollars. (2 marks) 2. Calculate the margin of safety in dollars. (2 marks) $ 72,000 32,400 39,600 25,000 $ 14,600 3. Calculate the company's degree of operating leverage. Round your answer to one decimal place. (2 marks) 4. Use the operating leverage calculated in part 3 to calculate the percentage increase in operating income if sales increase by 30%. (1 mark) 5. How many dollars of sales are needed to reach a before-tax operating profit of $16,000? (2 marks) 6. Prepare an incremental analysis to calculate the dollar impact on operating income of having a $2,000 advertising campaign to increase sales by 10%. Should the company proceed with this course of action? Why? (3 marks)
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