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 $200,000 per year. Its operating results for last year were as follows: Contribution margin Sales (21,000 units) Variable expenses Fixed expenses Operating income $504,000 252,000 252,000 200,000 $ 52,000 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 sales dollars. 3. Assume this year's total sales increase by $50,000. 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 20% 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 20%. 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 20%. How much could the president increase this year's advertising expense and still earn the same $52,000 operating income as last year? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Req 5A Req 5B Req 6 What is the product's CM ratio? CM ratio % Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Req 5A Req 5B Req 6 Use the CM ratio to determine the break-even point in sales dollars. (Round your final answer to the nearest whole dollar amount.) Break-even point in dollar sales < Req 1 Req 3 > Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Req 5A Req 5B Req 6 Assume this year's total sales increase by $50,000. If the fixed expenses do not change, how much will operating income increase? Operating income by < Req 2 Req 4A > Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Req 5A Req 5B Req 6 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.) Degree of operating leverage < Req 3 Req 4B > Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Req 5A Req 5B Req 6 Assume that the operating results for last year were as in the question data. The president expects sales to increase by 20% 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.) Operating income increases by % Dollar increase in operating income < Req 4A Req 5A > Show less Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Req 5A Req 5B Reg 6 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 20%. If the sales manager is right, what would be this year's operating income if his ideas are implemented? (Do not round intermediate calculations.) Operating income < Req 4B Req 5B > Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Req 5A Req 5B Req 6 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 20%. 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 sign.) Increase (decrease) to operating income < Req 5A Req 6 > Show less Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Req 5A Req 5B Req 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 20%. How much could the president increase this year's advertising expense and still earn the same $52,000 operating income as last year? The amount by which advertising can be increased is < Req 5B Req 6 > Show less