Question
Problem: 1 Woodley Corporation management has budgeted the following amounts for its next fiscal year: Total fixed expenses $500,000 Sale price per unit $1,000 Variable
Problem: 1
Woodley Corporation management has budgeted the following amounts for its next fiscal year:
Total fixed expenses
$500,000
Sale price per unit
$1,000
Variable expenses per unit
$600
Requirements:
1.If Woodley Corporation can reduce fixed expenses by $20,000, how will break-even sales in units be affected?
2.If Woodley Corporation spends an additional $15,000 on advertising, sales volume should increase by 1,000 units. What effect will this have on operating income?
3.If Woodley Corporation can reduce fixed expenses by $50,000, by how much can variable expenses per unit increase and still allow the company to maintain the original break-even sales in units?
4.If fixed expenses increase by 20%, to maintain the original break-even sales in units, what would be the sale price per unit have to be?
Problem: 2
Happy Feet hiking socks have variable cost of $6 per pair which are then sold for $10 per pair.Monthly fixed costs are $18,000; current sales are 12,000 pairs per month.
Required:
1.Compute the break-even sales in units.
2.Compute ABC's margin of safety in units and sales dollars.
3.Compute ABC's margin of safety as a percentage.
4.Compute ABC's operating leverage factor.
5.Compute ABC's % of operating income decline if sales fall by 20%.
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