Problem 5-23 CVP Applications; Contribution Margin Ratio: Degree of Operating Leverage LO5-1, LO5 3, LO5-4, LO5-5, LO5-8] Feather Friends, Inc, distributes a high-quallity wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $180,000 per year Its operating results for last year were as follows: Sales $1,080,000 Variable 540,000 expenses Contribution 540,000 margin Fixed expenses Net operating income 180,000 360,000 Required: Answer each question independently based on the original data: 1 What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. If this year's sales increase by $55,000 and fixed expenses do not change, how much will net operating income increase? 4-a. What Is the degree of operating leverage based on last years sales? 4-b. Assume the president expects this year's sales to increase by 11%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? the selling price, combined with a $68,000 increase in 5. The sales manager is convinced that a 12% reduction advertising, would increase this year's unit sales by 25 %. 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 managers ideas are implemented, how much will net operating income increase or decrease over last year? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.60 per unit. He thinks that this move, combined with some increase in advertising, would increase this years sales by 25 % . How much could the president increase this years advertising expense and st earn the same $360,000 net operating income as last year