Question's 1-12

Feather Friends distrubutes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $24 per unit, and fixed expenses total $240,000 per year. 1. What types of costs might be included in variable expenses? 2. What types of costs might be included infined expenses? 3. When the company purchases wood and glue to make the birdhouses, what type of inventory do we call that? 4. Once production begins on a birdhouse, we consider it to be which category of inventory? 5. After WIP, the costs associated with a particular birdhouse are moved to ??? 6. How are those costs categorized on the PS? 7. When are those costs expensed on the FS? 8. What is the product's CM ratio? 9. Use the CM ratio to determine the break-even point in dollar sales. 10. Assume that the operating results for last year were: Sales $ 800,000 Variable expenses 480.000 Contribution margin 320,000 Fixed expenses 240.000 Net operating income $ 80.000 a Compute the degree of operating leverage at the current level of sales b. The president expects sales to increase by 4% next year. By what percentage should net operating income increase? 12. Refer to the original data. Assume that the company sold 18,000 units last year. The sales manager is convinced that a 5% reduction in the selling price, combined with a $30,000 increase in advertising, would increase annual unit sales by 1/3. Prepare two contribution format income statements, one showing the results of last year's operations and one showing the results of operations if these changes are made. Would you recommend that the company do as the sales manager suggests