Klein Company distributes a high-quality bird feeder that sells for $20 per unit. Variable costs are $6 per unit, and fixed costs total $196,000 annually Required: Answer the following independent questions: 1. What is the product's CM ratio? 224 CM ratio 70% 2. Use the CM ratio to determine the break-even point in sales dollars Broak-oven point in sales dollar $ 280.000 3. The company estimates that sales will increase by $66,000 during the coming year due to increased demand By how much should operating income increase? Operating income increases by 4. Assume that the operating results for last year were as follows $400,000 106,000 Sales Variable expenses Contribution margin Fixed expenses 294,000 196,000 Operating income $ 98,000 a. Compute the degree of operating leverage at the current level of sales. Degree of operating leverage 15153 bok int b. The president expects sales to increase by 15% next year. By how much should operating income increase? ences Operating income increases by Mate probless napter 4 Saved Help Save 1 5-6. Refer to the original data. Assume that the company sold 23,000 units last year. The sales manager is convinced that a 15% reduction in the selling price, combined with a $40,000 Increase in advertising expenditures, would cause annual sales in units to increase by 20%. Prepare two contribution format income statements, one showing the results of last year's operations and one showing what the results of operations would be if these changes were made. (Round "Per Unit" answers to 2 decimal places.) 01:51:41 BOOK KLEIN COMPANY Contribution Margin income Statement Last Year 23,000 units Total Per Unit Frint Proposed units Total Per Unit rences Sales Variable expenses Contribution margin Fixed expenses Not operating income 000 0 0.00 0 196.000 (196.000) 5 $ Prey Noxt > c 5-b. Would you recommend that the company do as the sales manager suggests? O Yes 31 NO 6. Refer to the original data. Assume again that the company sold 23.000 units last year. The president feels that it would be unwise to change the selling price. Instead, he wants to increase the sales commission by $3 per unit He thinks that this move, combined with some increase in advertising, would increase annual unit sales by 50%. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement, use the incremental analysis approach es The amount by which advertising can be increased is