Question
Mustang Ltd. processes cow skins into leather soles for shoes. The unit selling price is $32, the unit variable cost is $24, and fixed costs
Mustang Ltd. processes cow skins into leather soles for shoes. The unit selling price is $32, the unit variable cost is $24, and fixed costs are $320,000. Required. For parts d, e, and f, assume Mustang is able to reduce its variable costs by $3 per unit. D)What is the new contribution margin per unit? E)What is the new break-even point? F)We are still experiencing the lower variable costs from parts d and e. Mustang executives believe that if they lowered the selling price by 10%, they would sell 20% more units. What sales dollar figure would now be required to earn an operating profit of $60,000? G)At an operating profit of $40,000 and costs as per the initial data, what is the degree of operating leverage? Show your calculations.
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