Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Take me to the text The Chokolate Shop has an operating profit of $28,000. a) Calculate the degree of operating leverage for each of the

image text in transcribedimage text in transcribed

Take me to the text The Chokolate Shop has an operating profit of $28,000. a) Calculate the degree of operating leverage for each of the independent cases (assuming operating profit is held constant): i. Contribution Margin is $55,000. ii. CM ratio is 56% and revenue is $145,000. iii. Selling price per unit is $35, variable costs per unit are $7 and it sold 3,800 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. $ $ ii. $ $ iii. $ b) Which scenario has the largest degree of operating leverage? Scenario: Check Take me to the text Bliss Company wants to open a new spa in a nearby plaza. Bliss Company will be offering half-day spa treatments for $180 each. Variable costs (not including the leasing costs below) are $67 for every treatment. In terms of lease payments, the plaza has provided him three options: i. Pay $32 per treatment given ii. $25,000 per month iii. $11,000 per month and $11 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 300 treatments are given and if 570 treatments are given. Lease Option Operating Profit Based on the Number of Treatments Given 300 units 570 units i. Pay $32 per treatment given $ 9600 $ 18240 ii. $25,000 per month $ 7500000 $ 14250000 iii. $11,000 per month and $11 per treatment given $ $ b) At a level of 570 massages, which option should be recommended? Option: iii. c) Calculate the degree of operating leverage for the second lease option if Bliss Company gives 570 treatments. Round your answer to 2 decimal places. Degree of Operating Leverage: Check

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_2

Step: 3

blur-text-image_3

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 In A Nutshell Accounting For The Non-specialist

Authors: Walker, Janet

3rd Edition

075068738X, 9780750687386

More Books

Students also viewed these Accounting questions