Problem 1 - RGS Company distributes a single product called a Sailsafe. The company's sales and expenses for last month follow: Total Per Unit Sales Variable expenses Fixed expenses $ 616,000 $ 40 431,200 28 Contribution margin 184,800 $ 12 154,800 Net operating income $ 30,000 Required (show your work): 1 What is the monthly break-even point in unit sales and in dollar sales? 2. Without resorting to computations, what is the total contribution margin at the break-even point? 3-a. How many units would have to be sold each month to attain a target profit of $68,400? 3-b. Verify your answer by preparing a contribution format income statement at the target sales level. 4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. 5. What is the company's CM ratio? If the company can sell more units thereby increasing sales by change in fixed expenses, by how much would you expect monthly net operating income to increase? $89,000 per month and there is no Problem 2 - CVP Applications; Contribution Margin Ratio: Degree of Operating Leverage - JSL, Incorporated, distributes a dollhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales Variable expenses $3,000,000 1,500,000 Contribution margin 1,500,000 Fixed expenses 180,000 Net operating income $1,320,000 Required: Answer each question independently based on the original data (show your work): 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. Assume this year's unit sales and total sales increase by 49,000 units and $5,880,000, respectively. If how much will net operating income increase? the fixed expenses do not change, 4-a. What is the degree of operating leverage based on last year's sales? 4-b. Assume the president expects this year's unit sales to increase by 13%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced that a 12% reduction in the selling price, combined with a $60,000 increase this year's unit sales by 25%. increase in advertising, would a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? b. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year?