Inc, distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, Feather Friends, I and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income 340,8 $1,80,00e 540,808 540,808 200,8e0 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.It this year's sales increase by $60,000 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 years sales? 4b. Assume the president expects th percentage increase in net operating income will the company realize this year? is year's sales to increase by 13% Using the degree of operating leverage from last year, w hat 5. The sales manager is convinced that a 12% reduction in the selling price, combined with a $78000 increase in advertising, would increase this year's unit sales by 25%. a. H 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? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.00 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25% How much could the president increase this year's advertising expense and still earn the same $340,000 net operating income as last year? Complete this question by entering your answers in the tabs below Req 1 Req 2 Req 4A Req 4B Req SB Req 6 Prev3 of5 Type here to search Next keu expelses Net operating income 340,889 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 $60,000 and fixed expenses do not change, how much will net operating incom 4-a. What is the degree of operating leverage based on last year's sales? 4bsume thepedent expetsthis years sales to increase by 13%e Using the degree of operating levbrage from last year, what percentage increase in net operating income will the company realize this year? 5.The sales manager is convinced that a 12% reduction in the selling price, combined with a $78,000 increase in advertising, would increase this year's unit sales by 25%. es 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 managers suggestions? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.00 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $340,000 net operating income as last year? Complete this question by entering your answers in the tabs below Ren 1 Req 2 Rea 3 Rea 4A Req 48 Req SA Req SB Req 6 what is the product's ratio
