Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Pixed expenses Net operating income $ 2,380,000 1.440,000 1.440,000 180.000 $1,260,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. If this year's sales increase by $55,000 and fixed expenses do not change, how much will net operating income increase? 4-a. What is the degree of operating leverage based on last year's sales? 4-b. Assume the president expects this year's sales to increase by 20%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced that a 10% reduction in the selling price, combined with a $68,000 increase in advertising, would increase this year's unit sales by 25%. a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? b. If the sales manager's ideas are implemented, how much wil net operating income increase or decrease over last year? b. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.80 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25% How much could the president increase this year's advertising expense and still earn the same $1,260,000 net operating income as last year? Complete this question by entering your answers in the tabs below. Reg 2 Reg 1 Req3 Req 4A Reg 6 Req 48 ReqSA Reg 58 What is the product's CM ratio? CM ratio % Complete this question by entering your answers in the tabs below. Reg 1 Real Req 3 Req 4A Reg 4B Reg SA Req 5B Reg 6 Use the CM ratio to determine the break-even point in dollar sales. (Do not round Intermediate calculations.) Break-even point in dollar sales Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg Reg 4A Req 4B ReqSA Reg 58 Reg 6 If this year's sales increase by $55,000 and fixed expenses do not change, how much will net operating income increase? Net operating income - -- Req2 Req 4A > Req 1 Req 2 Reg 3 Regle Reg 48 Req SA Reg 5B Reg 6 What is the degree of operating leverage based on last year's sales? (Round intermediate calculations and final answers to 2 decimal places.) Degree of operating leverage Reg 1 Req3 Req 4A Red 48 ReqSA Req 5B Req6 Assume the president expects this year's sales to increase by 20%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? (Round intermediate calculations and final answer to 2 decimal places.) Net operating income increases by % Reg 1 Reg 2 Reg 3 Req 4A Req 48 Req5A Req 5B Req 6 The sales manager is convinced that a 10% reduction in the selling price, combined with a $68,000 increase in advertising, would increase this year's unit sales by 25%. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? (Do not round intermediate calculations.) Net operating income (loss) Os) Reg 1 Reg 2 Req3 Req 4A Req 48 Reg SA Reg 58 Rq6 The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.80 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $1,260,000 net operating income as last year? Show less The amount by which advertising can be increased is