Question
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
Sales | $ 85,000 |
---|---|
Variable expenses | 59,500 |
Contribution margin | 25,500 |
Fixed expenses | 20,400 |
Net operating income | $ 5,100 |
1. If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income? (Round "Per Unit" calculations to 2 decimal places.)
2. If the variable cost per unit increases by $1, spending on advertising increases by $1,750, and unit sales increase by 250 units, what would be the net operating income? (Round "Per Unit" calculations to 2 decimal places.)
3. What is the break-even point in unit sales? (Round intermediate calculations to 2 decimal places.)
4. What is the break-even point in dollar sales?
5. How many units must be sold to achieve a target profit of $15,300? (Round intermediate calculations to 2 decimal places.)
6. What is the margin of safety in dollars? What is the margin of safety percentage?
7. What is the degree of operating leverage? (Round your answer to 2 decimal places.)
8. Using the degree of operating leverage, what is the estimated percent increase in net operating income that would result from a 5% increase in unit sales? (Round your intermediate calculations and final answer to 2 decimal places.)
9. Assume that the amounts of the companys total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $20,400 and the total fixed expenses are $59,500. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage? (Round your answer to 2 decimal places.)
10. Assume that the amounts of the companys total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $20,400 and the total fixed expenses are $59,500. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in unit sales? (Round your intermediate calculations and final answer to 2 decimal places.)
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