Gold Star Rice, Limited, of Thailand exports Thai rice throughout Asia. The company grows three varieties of rice-White, Fragrant, and Loonzain. Budgeted sales by product and in total for the coming month are shown below: Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Product White Fragrant Loonzain Total Sales $ 2, 240,000 Percentage of total sales 48% 20% 32% 100% Variable expenses 1, 120, 080 Sales $ 355, 200 100% $ 148 , 090 100% $ 236, 800 100% $ 740,000 100% Contribution margin 1 , 126,060 Variable expenses 106 , 560 30% 118,400 80% 130,240 55% 355,200 48% Fixed expenses 200 , 080 Contribution margin $ 248 ,640 70% $ 29,608 20% $ 106, 560 45% 384, 800 5 2% Net operating income $ 920,000 Fixed expenses 227 , 760 Net operating income $ 157, 040 Required: Answer each question independently based on the original data: Dollar sales to break-even = Fixed expenses / CM ratio = $227,760 / 0.52 =$438,000 . What is the product's CM ratio? As shown by these data, net operating income is budgeted at $157,040 for the month and the estimated break-even sales is 2. Use the CM ratio to determine the break-even point in dollar sales. $438.000. 3. Assume this year's unit sales and total sales increase by 42,000 units and $3,360,000, respectively. If the fixed expenses do not change, how much will net operating income increase? Assume that actual sales for the month total $740,000 as planned; however, actual sales by product are: White, $236,800; Fragrant, $296.000; and Loonzain, $207,200. 4-a. What is the degree of operating leverage based on last year's sales? 4-b. Assume the president expects this year's unit sales to increase by 17%. Using the degree of operating leverage from last year, Required: what percentage increase in net operating income will the company realize this year? 1. Prepare a contribution format income statement for the month based on the actual sales data. 2. Compute the break-even point in dollar sales for the month based on your actual data. 5. The sales manager is convinced that a 14% reduction in the selling price, combined with a $78,000 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? Complete this question by entering your answers in the tabs below. b. If the sales manager's ideas are implemented, how much will 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 $2 20 per unit. He Required 1 Required 2 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 $920,000 net operating income as last year? Prepare a contribution format income statement for the month based on the actual sales data. Complete this question by entering your answers in the tabs below. Gold Star Rice, Limited Contribution Income Statement Product Req 1 Reg 2 Reg 3 Req 4A Req 4B Reg 5A Reg 5B Req 6 White Fragrant Loonzain Total Percentage of total sales de Assume the president expects this year's unit sales to increase by 17%. 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.) be sea o O Net operating income increases by CA
