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Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit Variable expenses are 58 per un fixed expenses total $180,000 per
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit Variable expenses are 58 per un 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 $ 400,000 160,000 240,000 180,000 $ 60,00 ak 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 $75,000 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 $30,000 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
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