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 5600 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%