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): Salos Variable expenses Contribution margin Fixed expenses Not operating income $20,000 12.000 8,000 6,000 $ 2.000 Required: A 8 D E K M 0 If the variable cost per unit increases by $1. spending on advertising increases by $1,500, and unit sales increase by 250 units, what would be the net operating income? Total Per Unit Sales Variable expenses Contribution margin Fixed expenses Net operating income T 8. What is the break-even point in unit sales? F G H 2 3 4 5 Fixed cost - (a) Unit contribution margin-see Q1 (b) Breakeven quantity (a) (b) 9. What is the break-even point in dollar sales? 6 7 8 9 10 11 12 13 14 15 16 Fixed cost (a) Contribution margin ratio- see Q2 (b) Dollar sales to breakeven (a) (b) OR 17 Unit selling price (a) Unit sales to breakeven (b) Dollar sales to breakeven (a) (b) 18 19 F G - How many units must be sold to achieve a target profit of $5,000? Fixed costs Target profit Total fixed costs & target profit (a) Unit contribution margin (b) Units to attain target profit (a) = (b) C K G H 1. What is the margin of safety in dollars? What is the margin of safety percentage? Margin of safety (in dollars) Sales (a) Break-even sales -see Q9 (b) Margin of safety (in dollars) (a)-(b) Margin of safety as a percentage of sales Margin of safety (in dollars) (a) Sales (b) Margin of safety percentage (a) = (b) Chap 5 Question 01 Q2 Q3 Q4 Q5 QE eady Takeaway #2