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Only need answers 4b, 5a, 5b, & 6. Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that selis for $120 per unit. Variabie expenses are
Only need answers 4b, 5a, 5b, & 6.
Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that selis for $120 per unit. Variabie expenses are $60.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: 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 doliar soles. 3. Assume this year's unit sales and total sales increase by 43,000 units and $5,160,000, respectively. If the fixed expenses do not change, how much will net operating income increase? 4a. What is the degree of operating leverage based on last year's sales? 4.b. Assume the president expects this year's unit sales to increase by 14%. Using the degree of operating leverage from lastyeat, What percentage increase in net operating income will the Gompany realize this year? 5. The sales manager is convinced that a 13x reduction in the selling price, combined with a $72,000 increase in advertising, would increase this year's unit soles by 25%. a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? b. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year? 6. The president does not want to change the seling price. Instead, he wants to increase the sales commission by $1.80 per unit He thinks that this move, combined with some increase in advertising. would increase this year's unit sales by 25%. How much could the president increase this year's advertising expense and still earn the same $1.320.000 net operating income as last year Step by Step Solution
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