Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit Variable expenses are $40,00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income $2,880,000 1,040,000 1,040,000 180,000 860,000 Required: Answer each question independentiy 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. Assume this year's unit sales and total sales increase by 54.000 units and $4,320,000, respectively. If the 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? 4-6. Assume the president expects this year's unit sales to increase by 16%. 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 14% reduction in the selling price, combined with a $64,000 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? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by S1.90 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's unit sales by 25% How much could the president increase this year's advertising expense and still earn the same $860,000 net operating income as last year? Reg 1 Reg 2 Reg 3 Req 4A Reg 4B Reg 5A Reg SB Reg 6 What is the product's CM ratio? CM ratio % Reg 2 > Reg 1 Reg 2 Req3 Req 4A Reg 48 Reg 5A Reg 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 Reg1 Req3 > Reg 2 Reg 43 Reg 5B Reg 6 Reg 1 Req3 Reg 4 Reg SA Assume this year's unit sales and total sales increase by S4,000 units and $4,320,000, respectively. If the fixed expenses do not change, how much will net operating income increase? (Do not round Intermediate calculations.) by Not operating income Reg 5B Reg 6 Reg 1 Reg 2 Reg 3 Reg SA Reg 4 Reg 48 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 Reg 2 Reg 3 Reg 4A Reg 4B Reg 5B Reg 6 Req 5A Assume the president expects this year's unit sales to increase by 16%. 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 4A Reg SA > Reg 5A Reg 5B Reg 6 Reg 2 Reg 4A Reg 4 Reg 1 Reg 3 The sales manager is convinced that a 14% reduction in the selling price, combined with a $64,000 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) Req 58 Reg 6 Reg 5A Reg 48 Reg 2 Reg 3 Req 4A Reg 1 The sales manager is convinced that a 14% reduction in the selling price, combined with a $64,000 increase in advertising, would increase this year's unit sales by 25%. If the sales manager's ideas are implemented, how much will net operating Income increase or decrease over last year? (Negative amounts should be input with a minus sign.) Increase (decreaso) to not operating income Reg. > Reg SA Req 58 Reg 6 Reg 4A Req 4B Req 5A Reg 3 Reg 1 Reg 2 The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.90 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's unit sales by 25%. How much could the president increase this year's advertising expense and still earn the same $860,000 net operating income as last year? (Do not round intermediate calculations.) Show less The amount by which advertising can be increased is
