Question
The following is Alsatian Corporations contribution format income statement from last month: Sales(2000 units x $70) $140,000 Less: Variable Costs 84,000 Contribution Margin 56,000 Less:
The following is Alsatian Corporations contribution format income statement from last month:
Sales(2000 units x $70) $140,000
Less: Variable Costs 84,000
Contribution Margin 56,000
Less: Fixed Expenses 24,000
Operating Income $32,000
The company has no beginning or ending inventories and produced and sold 2,000 units during the month. 1. What sales in units would be required to attain an operating income of $39,000? 2. What is the companys degree of operating leverage based on the original data? if sales increased by 15% above the amounts in the original data, how much in $ would net income increase? 3. If the business requires an operating income of 20% of sales, what will be the required sales in dollars, assuming all costs and selling prices remain as in the original data? (4 marks) 4. Suppose Alsatian Corporation had a tax rate of 25% and wants to earn an after tax net income of $24,000. Calculate the sales in units that would be needed from the original data. (3 marks)
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