Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $24 per unit. Variable expenses are $12 per unit, and fixed expenses total $220,000 per year. Its operating results for last year were as follows: 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 sales dollars. 3. Assume this year's total sales increase by $40,000. If the fixed expenses do not change, how much will operating income increase? Assume that the operating results for last year were as in the question data. 4-a. Compute the degree of operating leverage based on last year's sales. 4-b. The president expects sales to increase by 24% next year. Using the degree of operating leverage from last year, what percentage increase in operating income will the company realize this year? Calculate the dollar increase in operating income. 5. The sales manager is convinced that a 10% reduction in the selling price, combined with a $32,000 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 operating income if his ideas are implemented? b. If the sales manager's ideas are implemented, how much will 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 $1 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 $68,000 operating income as last year? Complete this question by entering your answers in the tabs below. What is the product's CM ratio? Use the CM ratio to determine the break-even point in sales dollars. (Round your final answer to the nearest whole dollar amount.) Assume this year's total sales increase by $40,000. If the fixed expenses do not change, how much will operating income increase? Assume that the operating results for last year were as in the question data. Compute the degree of operating leverage based on last year's sales. (Round your answer to 2 decimal places.) Assume that the operating results for last year were as in the question data. The president expects sales to increase by 24% next year. Using the degree of operating leverage from last year, what percentage increase in operating income will the company realize this year? Calculate the dollar increase in operating income. (Round your intermediate calculations and final percentage answer to 2 decimal places. Round other final answer to the nearest whole dollar amount.) The sales manager is convinced that a 10% reduction in the selling price, combined with a $32,000 increase in advertising, would increase this year's unit sales by 25%. If the sales manager is right, what would be this year's operating income if his ideas are implemented? (Do not round intermediate calculations.) The sales manager is convinced that a 10% reduction in the selling price, combined with a $32,000 increase in advertising, would increase this year's unit sales by 25%. If the sales manager's ideas are implemented, how much will operating income increase or decrease over last year? (Do not round intermediate calculations. Decrease amount should be input with a minus The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1 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 $68,000 operating income as last Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 6,400 units for each $2 reduction in the selling price. The company's present selling price is $60 per unit, and variable expenses are $26 per unit. Fixed expenses are $660,000 per year. The present annual sales volume (at the $60 selling price) is 16,500 units. Required: 1. What is the present yearly operating income or loss? 2. What is the present break-even point in unit sales and in dollar sales? (Round intermediate caiculations and final answers to the nearest whole number.)
