EJE Sardines Processing manufactures and sells canned sardines. Variable cost per can amounts to $8 and the selling price of each can is $30. Total annual fixed costs amount to $16,683,333. Sales are estimated to amount to 1,300,000 cans of sardines.

Round dollar answers to the nearest whole number and round BE units up to the nearest whole number, unless otherwise indicated.

a) Calculate the following values.

Gross Sales: $Answer

Total Variable Costs: $Answer

Contribution Margin: $Answer

Operating Income: $Answer

b) If the company sells according to their estimates, what is the degree of operating leverage? The break-even point (in units)?

Round the degree of operating leverage to 2 decimal places.

Degree of operating leverage:Answer

Break-even Point (units):Answer

c) If the company increases the sales volume (cans) by 40%, by what percentage will operating income increase? By what dollar amount will operating income increase? Use the degree of operating leverage.

Round the percentage increase to 2 decimal places.

Percentage Increase:Answer

%

Dollar Increase: $Answer

d) If the company spends $25,000 as additional advertising expense (fixed cost), sales volume will increase by 13%. Determine the new operating leverage and the new break-even point in units.

Round the degree of operating leverage to 2 decimal places.

Degree of operating leverage:Answer

Break-even point (units):Answer