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Mido Company purchases and sells hiking socks. The cost equation for sales volumes within the relevant range is Y = 12,000 + 6X. The sale
Mido Company purchases and sells hiking socks. The cost equation for sales volumes within the relevant range is Y = 12,000 + 6X. The sale price is 10 per unit and contribution margin percentage is 40% Required: 1- Compute the breakeven point in units and in Sterling Pounds and draw a CVP chart for the company. 2- How many units must be sold to reach the target net income of 34,000? 3- Mido expects to sell 3,800 hiking socks. Compute the margin of safety in units. 4- Assume that Mido finds a new supplier with lower purchase price per pair. What is the effect on the breakeven point? 5- Assume that Mido's income statement at sales of 4000 hiking socks is as follows: Revenues 40,000 Variable cost 24,000 Contribution margin 16,000 Fixed costs 12,000 Operating income 4,000 Calculate the degree of operating leverage and explain what is meant by operating leverage using your results. 6- What are the assumptions of CVP analysis
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