Question (4) Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she has gathered the following data for her new store Sales price per pair of sandals $ 20 Variable expenses per pair of sandals 14 Contribution margin per pair of sandals 6 Fixed expenses per year Building rental S 1,800 Equipment depreciation 1,800 Selling 1.800 Administrative 6,600 Total fixed expenses $12,000 Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year its operating results for last year were as follows Sales $ 2,000,000 Variable expenses 1,000,000 Contribution margin 1,000,000 Fixed expenses 180,000 Net operating incomes 820,000 Required: Required: Answer each question independently based on the original data 1. What is the product's CM ratio? 2. 2. Use the CM ratio to determine the break-even point in dollar sales. 3. 3. If this year's sales increase by S51,000 and fixed expenses do not change, how much will net operating income increase? 4. 4-a. What is the degree of operating leverage based on last year's sales? 4-6. Assume the president expects this year's sales to increase by 10%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? 5. 5. The sales manager is convinced that a 12% reduction in the selling price, combined with a $63,000 increase in advertising, would increase this year's unit sales by 25% a. If the sales manager is night, what would be this year's net operating income if his ideas are implemented? b. b. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year? 6. 6. The president does not want to change the selling price Instead, he wants to increase the sales commission by $2 20 per unit He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $820,000 net operating income as last year? 3