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1.Zen Company wants to open a new spa in a nearby plaza. Zen Company will be offering half-day spa treatments for $110 each. Variable costs (not including the leasing costs below) are $75 for every treatment.

In terms of lease payments, the plaza has provided him three options: i. Pay $35 per treatment given ii. $21,000 per month iii. $17,000 per month and $13 per treatment given Do not enter dollar signs or commas in the input boxes. Use the negative sign for negative values. Round all answers to the nearest whole number. a) Calculate the monthly operating profit for each of the three options if 280 treatments are given and if 740 treatments are given.

Lease Option	Operating Profit Based on the Number of Treatments Given
	280 units	740 units
i. Pay $35 per treatment given	$Answer	$Answer
ii. $21,000 per month	$Answer	$Answer
iii. $17,000 per month and $13 per treatment given	$Answer	$Answer

b) At a level of 740 massages, which option should be recommended? Option: Answeriiiiii

c) Calculate the degree of operating leverage for the second lease option if Zen Company gives 740 treatments. Round your answer to 2 decimal places. Degree of Operating Leverage: Answer

2.

The Chokolate Shop has an operating profit of $20,000.

a) Calculate the degree of operating leverage for each of the independent cases (assuming operating profit is held constant): i. Contribution Margin is $60,000. ii. CM ratio is 50% and revenue is $111,000. iii. Selling price per unit is $36, variable costs per unit are $6 and it sold 4,700 units. Do not enter dollar signs or commas in the input boxes. Round contribution margin and operating income to the nearest whole number. Round the degree of operating leverage to 2 decimal places.

	Contribution Margin	Operating Profit	Degree of Operating Leverage
i.	$Answer	$Answer	Answer
ii.	$Answer	$Answer	Answer
iii.	$Answer	$Answer	Answer

b) Which scenario has the largest degree of operating leverage? Scenario: Answer

3.

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City Bagel operates a bagel store in Niagara Falls. The owner has provided the following budgeted data for next year.

Revenue	$11,393
Fixed Costs	$3,565
Variable Costs (depends on the # of bagels sold)	$7,961

For each of the following scenarios, determine the dollar impact on City Bagel. Consider each scenario independently. Do not enter dollar signs or commas in the input boxes. Round all answers to the nearest whole number. Enter all values as positive values. Do not use the negative sign. i. A 7% increase in fixed costs.

Revenue:	AnswerDecrease byIncrease byNo change	$Answer
Variable Costs:	AnswerDecrease byIncrease byNo change	$Answer
Fixed Costs:	AnswerDecrease byIncrease byNo change	$Answer
Contribution Margin:	AnswerDecrease byIncrease byNo change	$Answer
Budgeted Operating Profit:	AnswerDecrease byIncrease byNo change	$Answer

ii. A 15% increase in contribution margin, but holding revenue constant.

Revenue:	AnswerDecrease byIncrease byNo change	$Answer
Variable Costs:	AnswerDecrease byIncrease byNo change	$Answer
Fixed Costs:	AnswerDecrease byIncrease byNo change	$Answer
Contribution Margin:	AnswerDecrease byIncrease byNo change	$Answer
Budgeted Operating Profit:	AnswerDecrease byIncrease byNo change	$Answer

iii. A 20% increase in fixed costs and 13% increase in units sold.

Revenue:	AnswerDecrease byIncrease byNo change	$Answer
Variable Costs:	AnswerDecrease byIncrease byNo change	$Answer
Fixed Costs:	AnswerDecrease byIncrease byNo change	$Answer
Contribution Margin:	AnswerDecrease byIncrease byNo change	$Answer
Budgeted Operating Profit:	AnswerDecrease byIncrease byNo change	$Answer

4.

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BGB Tuna Processing manufactures and sells canned tuna to restaurants. Variable cost per can amounts to $6 and the selling price of each can is $25. Total annual fixed costs amount to $14,630,000. Sales are estimated to amount to 1,470,000 cans of tuna.

Do not enter dollar signs or commas in the input boxes. Round dollar answers to the nearest whole number and round BE units up to the nearest whole number, unless otherwise indicated. a) Calculate the following values. Gross Sales: $Answer

Total Variable Costs: $Answer

Contribution Margin: $Answer

Operating Profit: $Answer

b) If the company sells according to their estimates, what is the degree of operating leverage? The break-even point (in units)? Round the degree of operating leverage to 2 decimal places. Degree of operating leverage: Answer

Break-even Point (units): Answer

c) If the company increases the sales volume (cans) by 32%, by what percentage will operating profit increase? By what dollar amount will operating income increase? Use the degree of operating leverage. Round the percentage increase to 2 decimal places. Percentage Increase: Answer

% Dollar Increase: $Answer

d) If the company spends $28,000 as additional advertising expense (fixed cost), sales volume will increase by 13%. Determine the new operating leverage and the new break-even point in units. Round the degree of operating leverage to 2 decimal places. Degree of operating leverage: Answer

Break-even point (units): Answer