Problem 2.23 (Algo) CVP Applicatlons; Contrlbution Margin Ratio: Degree of Operating Leverage [LO2. 1,LO23,LO24,LO25,LO28 ] Feather Frlends, incorporated, olstributes a high-quality wooden birdhouse that selis for $120 per unit Variable expenses are $60.00 per unit and fixed expenses total $200,000 per year. Its operating results for last year were as follows. Required: Answer each question independently based on the original cata: 2. What ts the products CM ravo? 2. Use the CM ratio to determine the break-even point in dollar sales 3. Assume this year's unit saies and total sales increase by 4t,000 units and $4,920,000. respectively. If the fixed expenses do not. change, how much will net operating income increase? 4-a. What is the degree of operating ieverage based on last ysars sales? 4.b. Assume the president expects thls year's unit sales to incresse by 17% Using the degres of operating leversge from last year. what percentage increase in net operating income will the company realize this year? 5. Toe sales manager is corvinced that a 15% reduction in the selling poce: combined wath a $76,000 increase in advertlang, would increase this years unit seles by 25% a. If the sales manager is tight, what would be this year's net operating income if hys loeas are implemented? b. If the sales manager's ideas are implemented. how much will net operating income increase or decresse over latt year? 6. The president does notwart to change the seling price Instesd. he wants to increase the sales commlaton by 51.70 per uni: He thinks that this move, combined with rome increare in adverts ing, would increase thif year's und sales by 25%. How much could the president incresce this years advertising expense and still earn the same $1.240,000 net operasng incorme as last year