hapter 5 Homework #3 0 Saved Help Save & E Ch 4 Problem 5-23 CVP Applications; Contribution Margin Ratio: Degree of Operating Leverage LO5-3, LO5-4, LO5-5, LO5-8) nts Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $4 and fixed expenses total $200,000 per year. Its operating results for last year were as follows: eBook Print ferences Sales Variable expenses Contribution margin Fixed expenses Net operating income 1,920,000 960,000 960,000 200,000 $ 760,000 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 dollar sales. 3. If this year's sales increase by $51,000 and fixed expenses do not change, how much will net operating income incr 4-a. What is the degree of operating leverage based on last year's sales? 4b. Assume the president expects this year's sales to increase by 12%. Using the degree of operating leverage from 1 percentage increase in net operating income will the company realize this year? KPrev 4 of 4 Next percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced th 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. Do you recommend implementing the sales manager's suggestions? at a 15% reduction in the selling price, combined with a $73,000 increase in 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission b thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How president increase this year's advertising expense and still earn the same $760,000 net operating income as last 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 dollar sales. (Do not round intermediate calculations.) Break-even point in dollar sales Req1 Req 3 K Prev4 of 4 Next 4 D. Assume tne president expects tnis years sales to increase by 12%, Using the degree or oper percentage increase in net operating income will the company realiz ating leverage Tr e this year? 5. The sales manager is convinc 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. Do you recommend implementing the sales manager's suggestions? ed that a 15% reduction in the selling price, combined with a $73,000 increase in 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission b thinks that this move, combined with some increase in advertising, would increase this year president increase this year's advertising expense and still earn the same $760,000 net operating income as last 's sales by 25%. How Complete this question by entering your answers in the tabs below. Req 1 If this year's sales increase by $51,000 and fixed expenses do not change, how much will net operating income increa et operating income Req 2 Req 3 Req 4A Req 4B Req 5A Req 5B Req 6 by Req2 Req 4A > Prev4 of 4 N Next> Help Save 4-o assume tne preslaent expects tnis years sales to increase by 12% Using tne degree ot operating leverage trom percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced that a 15% reduction in the selling price, combined with a $ 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. Do you recommend implementing the sales manager's suggestions? 73,000 increase in ad he president does not want to change the selling price. Instead, he wants to increase the sales commission by $ hat this move, combined with some increase in advertising, would increase this year's sales by 25%. How mu 760,000 net operating income as last ye 6. T president increase this year's advertising expense and still earn the same $ 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 e degree of operating leverage based on last year's sales? (Round intermediate calculations and final answers What is th decimal places.) ree of operating leverage Req 3 Req 4B> 4-D. Assume tne presiaent expects tnis years saies to increase Dy 1/7%. Using tne degree or operating ieverage trom percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced that a 15% reduction in the selling price, combined increase this year's unit sales by 25%. a. If the s b. Do you recommend implementing the sales manager's suggestions? with a $73,000 increase in ad ales manager is right, what would be this year's net operating income if his ideas are implemented 6. The president does not want to change the selling price. Instead, he wants to incr thinks that this move, combined with some increase in advert ease the sales commission by $ . How mu nt increase this year's advertising expense and still earn the same $760,000 net operating income as last ye ising, would increase this year's sales by 25% 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 15% reduction in the selling price, combined with a $73,000 increase in advertisin ould increase this year's unit sales by 25%. If the sales manager is right, what would be this year's net operating incom his ideas are implemented? (Do not round intermediate calculations.) Net operating income (loss) Req 4B Req 5B > K Prev 4 of 4 Next CI 4-D. Assume tne presiaent expects tnis years sales to increase by i2%. Using tne degree o operating leverage Trom percentage increase in net operating income will the company realize th is year? 5. The sales manager is increase this year's unit sales by 25%. a. If the sales ma b. Do you recommend implementing the sales manager's suggestions? convinced that a 15% reduction in the selling price, combined with a $73,000 increase in adv nager is right, what would be this year's net operating income if his ideas are implemented? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission b thinks that this move, combined with some increase in advertising, would increase this president increase this year's advertising expense and still earn the same $760,000 net operating income as last yea y $1 year's sales by 25%. How muc 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 15% reduction in the selling price, combined with a $73,000 increase in advertising would increase this year's unit sales by 25%. Do you recommend implementing the sales manager's suggestions? Yes ONO