Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

seat. It incurs unit variable costs of $ 2 0 0 per seat and fixed costs of $ 2 , 0 0 0 , 0

seat. It incurs unit variable costs of $200 per seat and fixed costs of $2,000,000. It is considering automating the upholstery process, which is now largely manual. It estimates that if it does so, its fixed costs will be $3,000,000, and its unit variable costs will decline to $100 per seat.
The contribution margin ratio, break-even point in sales dollars, margin of safety ratio, and degree of operating leverage based on current activity are as follows:
Contribution margin ratio 60.00%
Break-even point in dollars $3,333,333
Margin of safety ratio
33.30%
Degree of operating leverage
3.00
Assuming the new upholstery system is implemented the contribution margin ratio, break-even point in sales dollars, margin of safety ratio, and degree of operating leverage are as follows:
Contribution margin ratio
80.00%
Break-even point in dollars
$3,750,000
Margin of safety ratio
25.00%
Degree of operating leverage
4.00
Discuss the implications of adopting the new system
Discuss the implications of adopting the new system

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Tools for business decision making

Authors: kimmel, weygandt, kieso

4th Edition

978-0470117262, 9780470534786, 470117265, 470534788, 978-0470095461

More Books

Students also viewed these Accounting questions

Question

How does the concept of hegemony relate to culture?

Answered: 1 week ago