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Enable Editing om the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Demonstration Problem 6 Nick is

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Enable Editing om the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Demonstration Problem 6 Nick is a beekeeper and sells honey at a roadside stand. He sells one half-gallon of honey for $4.50; his variable costs to produce one half-gallon are $2.70. He incurs $240,000 in fixed costs to run his apiary (bee farm). In 20X7, Nick expects to sell 200,000 half- gallons of honey (it is a busy road) and report a profit of S120,000. Nick's budget for 20X8 includes sales of 210,000 half-gallons and profit of $138.000 A. Verify Nick's profit projections for this 20x7 and next 20X8 by preparing pro-forma income statements in contribution margin (variable cost) format 20X7 Revenues - Variable costs Contribution margin Fixed costs Projected operating income 20x8 Revenues Variable costs - Contribution margin Fixed costs Projected operating income DVIEW Be care tres from the Internet can contan vises. Unless you need to edit it's safer to stay in Protected Ve. Enabledning Demonstration Problem 6 (continued) B. Calculate Nick's contribution margin per unit C. Calculate Nick's contribution margin ratio D. Calculate the breakeven point in units E. Calculate Nick's margin of safety expected for 20x7. F. Assume that companies on average have an operating leverage of 1.5 and assume you are an investor considering Nick's company If you are not willing to invest in a company more than 50% more risky than the average company, would you be willing to invest in Nick's company in 20X7? Be explicit regarding the criteria for your decision G. Calculate the sales revenue required to generate a target profit of $750,000

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