Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

plzz ans asap. give you thumbs up Stratford Company distributes a lightweight lawn chair that sells for $16 per unit. Variable expenses are 25% of

image text in transcribed

image text in transcribed

image text in transcribed

plzz ans asap. give you thumbs up

Stratford Company distributes a lightweight lawn chair that sells for $16 per unit. Variable expenses are 25% of sales, and fixed expenses total $156,000 annually. Required: Answer the following independent questions: 1. What is the product's CM per unit? Contribution margin per unit 2. Use the CM per unit to determine the break-even point in units. Break-even point in units 3. The company estimates that sales will increase by $35,000 during the coming year due to increased demand. By how much should net operating income increase? Increase in operating income 4. Assume that the operating results for last year were as follows: Sales $ 416,000 4. Assume that the operating results for last year were as follows: Sales Less: Variable expenses Contribution margin Less: Fixed expenses Net operating income $ 416,000 104,000 312,000 156,000 $ 156,000 a. Compute the degree of operating leverage at the current level of sales. (Round your answer to 1 decimal place.) Degree of operating leverage b. The president expects sales to increase by 16% next year. By how much should net operating income increase? Increase in operating income 5-8. Refer to the original data. Assume that the company sold 28,000 units last year. The sales manager is convinced that a 15% reduction in the selling price, combined with a $64,000 increase in advertising expenditures, would increase annual unit sales by 50%. Prepare two contribution format income statements: one showing the results of last year's operations, and one showing what the results of operations would be if these changes were made. (Do not round intermediate calculations. Round "Per Unit" answers to 2 decimal places.) Prepare two contribution format income statements: one showing the results of last year's operations, and one showing what the results of operations would be if these changes were made. (Do not round intermediate calculations. Round "Per Unit" answers decimal places.) Last Year Proposed Total Per Unit Total Per Unit Sales 6 5-b. Would you recommend that the company do as the sales manager suggests? O Yes O No 6. Refer to the original data. Assume again that the company sold 28,000 units last year. The president feels that it would be unwise to change the selling price. Instead, she wants to increase the sales commission by $2 per unit. She thinks that this move, combined with some increase in advertising, would double annual unit sales. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach. Increase in advertisement cost

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

Internal Control And Internal Audit In Non Profit Organizations A Practical Model

Authors: Kamal Bayramov

1st Edition

6203464015, 978-6203464016

More Books

Students also viewed these Accounting questions