Question
This information is for a volume of 5,000 units. Sales Revenue $160,000 Variable Costs ( 70,000) Contribution Margin $ 90,000 Fixed Costs (10,000) Net Income
This information is for a volume of 5,000 units.
Sales Revenue $160,000
Variable Costs ( 70,000)
Contribution Margin $ 90,000
Fixed Costs (10,000)
Net Income $ 80,000
Using the information above, answer the following questions and show all your calculations:
c) Would this company benefit if it increased fixed costs by $4,000 and decreased variable costs by 5%? Show your calculations to support your response.
d) Calculate the degree of operating leverage for this company, using the original information.
e) Using the DOL you calculated in part (d), what would be the effect on net income if sales increased by 2%?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started