Online ACCEX M Inbox (499) X ojector=1 National University of Computer and Emerging Sciences FAST School of Management Spring 2020 Islamabad Campus I Total 3. Hi-Fi Corp. manufactures and sells a specialized satellite cellular phone for outlying areas. The company's contribution format income statement for the most rece tyear is given below: Per Unit Sales (20,000 units) $1,200,000 ? Variable expenses 900.000 $45 Contribution margin 300,000 SIS Fixed expenses 240.000 Net operating income $60,000 Management is anxious to increase the company's profit and has asked for an analysis of a number of items. Required: a. Compute the company's CM ratio b. Compute the company's break-even point in both units and sales dollars. c. Assume that sales increase by $400,000 next year. If cost behavior patterns remain unchanged, by how much will the company's net operating income increase? Use the CM ratio to compute your answer. d. Refer to the original data. Assume that next year management wants the company to earn a profit of at least $90,000. How many units will have to be sold to meet this target profit? e. Refer to the original data. Compute the company's margin of safety in both sales dollar and units form f. The formula for degree of operating leverage is as given Degree of operating leverage Contribution margin: Net operating income Compute the company's degree of operating leverage at the present level of sales. [14) Suggested time: 25 mins O 33 3 DOLL Online ACCEX M Inbox (499) X ojector=1 National University of Computer and Emerging Sciences FAST School of Management Spring 2020 Islamabad Campus I Total 3. Hi-Fi Corp. manufactures and sells a specialized satellite cellular phone for outlying areas. The company's contribution format income statement for the most rece tyear is given below: Per Unit Sales (20,000 units) $1,200,000 ? Variable expenses 900.000 $45 Contribution margin 300,000 SIS Fixed expenses 240.000 Net operating income $60,000 Management is anxious to increase the company's profit and has asked for an analysis of a number of items. Required: a. Compute the company's CM ratio b. Compute the company's break-even point in both units and sales dollars. c. Assume that sales increase by $400,000 next year. If cost behavior patterns remain unchanged, by how much will the company's net operating income increase? Use the CM ratio to compute your answer. d. Refer to the original data. Assume that next year management wants the company to earn a profit of at least $90,000. How many units will have to be sold to meet this target profit? e. Refer to the original data. Compute the company's margin of safety in both sales dollar and units form f. The formula for degree of operating leverage is as given Degree of operating leverage Contribution margin: Net operating income Compute the company's degree of operating leverage at the present level of sales. [14) Suggested time: 25 mins O 33 3 DOLL
