Please complete questions 11-15
Fargo Company prepared the following contribution format income statement based on a sales volume of 2,000 units (the relevant range of production is 1,000 units to 2,500 units): Sales Variable expenses Contribution margin Fixed expenses Net operating income $55,000 36,000 19,000 10,400 $ 8,600 Required: 1. What is the contribution margin per unit? (Round your answer to 2 decimal places.) 2. What is the contribution margin ratio? 1. $19000/2000 units = $9.5 a unit 2. $19000/$55000 = 34.5% CMR 3.36000/55000 x 100 = 65.5% 4. $55000/2000Units = $27.5 3. What is the variable expense ratio? 5. 27.5 x 2012 = 55330 x 34.5 = 19089 55330 - 19089 = $36241 27.5 x 1850 = $50875 50875 x 34.5% = $17552 50875 - 17552 = $33323 4. If sales increase to 2,012 units, what would be the increase in net operating income? (Round your answer to z decimal places.) 5. If sales decline to 1,850 units, what would be the net operating income? 6. If the selling price increases by $1.50 per unit and the sales volume decreases by 250 units, what would be the nel operating income? 7. If the variable cost per unit increases by $1.25, spending on advertising increases by $2,050, and unit sales increase by 225 units, what would be the net operating income? 6. $1.5 x 1250 7. $36000/2000 = $18 | $18 + 1.25 = $19.25 $55000/2000=$27.5 27.5 x 2225 = $61187.5 (19.25 x 2225) = 42831.25 | 10400 + 2050 = 5906.25 NOI 8. What is the break-even point in unit sales? 8. 10400/27.5-18 = 1095 units 9. What is the break-even point in dollar sales? 9. 1095 units x 27.5 = 30112.50 10. 55000-30112.5 = $24887.5 / 55000 = 43.24% 11 12 13 15 15 10. How many units must be sold to achieve a target profit of $12,100? 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.) 13. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a % increase in sales? (Round your intermediate calculations and final answer to 2 decimal places) 14. Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $10,400 and the total fixed expenses are $36,000. 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 company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $10,400 and the total fixed expenses are $36,000. Given this scenario and assuming that total sales remain the same. Using the degree of calculated operating leverage, what is the estimated percent increase in net operating income of a 10% increase in sales? (Round your intermediate calculations and final answer to 2 decimal places.)
