Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help me with this. Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable expenses are $10 per unit,

Please help me with this.

image text in transcribed
Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable expenses are $10 per unit, and fixed expenses total $220,000 per year. Its operating results for last year were as follows: Sales (28,000 units) $ 560, 000 Variable expenses 280,000 Contribution margin 280, 000 Fixed expenses 220 , 000 Operating income $ 60,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in sales dollars. 3. Assume this year's total sales increase by $50,000. If the fixed expenses do not change, how much will operating income increase? Assume that the operating results for last year were as in the question data 4-a. Compute the degree of operating leverage based on last year's sales. 4-b. The president expects sales to increase by 15% next year. Using the degree of operating leverage from last year, what percentage increase in operating income will the company realize this year? Calculate the dollar increase in operating income. 5. The sales manager is convinced that a 12% reduction in the selling price, combined with a $30,000 increase in advertising, would increase this year's unit sales by 30%. a. If the sales manager is right, what would be this year's operating income if his ideas are implemented? b. If the sales manager's ideas are implemented, how much will operating income increase or decrease over last year? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's unit sales by 30%. How much could the president increase this year's advertising expense and still earn the same $60,000 operating income as last year? Complete this question by entering your answers in the tabs below. Req 1 Req 2

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles Volume 1

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

8th Canadian Edition

111950242X, 1-119-50242-5, 978-1119502425

More Books

Students also viewed these Accounting questions

Question

12.4. Describe the benefits of a business plan

Answered: 1 week ago