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 | $ 50,000 |
---|---|
Variable expenses | 27,500 |
Contribution margin | 22,500 |
Fixed expenses | 14,850 |
Net operating income | $ 7,650 |
5. If sales decline to 900 units, what would be the net operating income?
6. If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income?
8. What is the break-even point in unit sales?
9. What is the break-even point in dollar sales?
10. How many units must be sold to achieve a target profit of $13,500?
11. What is the margin of safety in dollars? What is the margin of safety percentage?
12. What is the degree of operating leverage? (Round your answer to 2 decimal places.)
14. 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 $14,850 and the total fixed expenses are $27,500. 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.)
15. 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 $14,850 and the total fixed expenses are $27,500. 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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