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Pat Crooks, the new owner of Investors has decided to move to Whitehorse, Yukon. It is anticipated that fixed monthly_expenses will be; office rent
Pat Crooks, the new owner of "Investors " has decided to move to Whitehorse, Yukon. It is anticipated that fixed monthly_expenses will be; office rent for $2,500, utilities $280, special telephone lines $600 and a connection with online brokerage service $640. Other expenses include advertising ( 5% of revenue), supplies and postage ( 2% of revenue), and usage fees for telephone lines in computers computerized brokerage services ( 3% of revenue). These expenses are paid in full monthly. Pat Crooks will receive a fixed salary from the business of $3,320 monthly plus a commission of 10% of revenue. Revenues for Personal Investors consist solely of fees earned for advising customers on stock trades and then executing stock trades on behalf of their clients. Each advising session and stock trade takes on average 45 minutes and generates $250 in revenues for Personal Investors. The volume of advising sessions to customers for 2023 is expected to be 1800 . YOU MUST SHOW ALL YOUR CALCULATIONS TO EARN MARKS. 1. How many advising sessions are needed annually to break even ? 2. Compute the number of advising sessions needed annually to earn a profit of $500,000 Is this goal realistic? Give your reason. 3. Compute the current annual margin of safety in units and in percentage. 4. Compute the current annual degree of operating leverage. 5. By what percentage will operating income change if annual sales volume is 15% higher than the anticipated sales volume of 1800
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