Tennessee Tonic makes a high-energy protein drink. The selling price per gallon is $7.20, and variable cost

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Tennessee Tonic makes a high-energy protein drink. The selling price per gallon is $7.20, and variable cost of production is $4.32. Total fixed cost per year is $316,600. The company is currently selling 125,000 gallons per year.

a. What is the margin of safety in gallons?

b. What is the degree of operating leverage?

c. If the company can increase sales in gallons by 30 percent, what percentage increase will it experience in income? Prove your answer using the income statement approach.

d. If the company increases advertising by $41,200, sales in gallons will increase by 15 percent. What will be the new break-even point? The new degree of operating leverage?

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a Sales 720 125000 900000 Variable Costs 432 125000 540000 Contribution Margin 360000 Fixed Costs 31...View the full answer

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Cost Accounting Foundations and Evolutions

ISBN: 978-1111626822

8th Edition

Authors: Michael R. Kinney, Cecily A. Raiborn

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Question Posted: Jul 24, 2012 03:15 AM

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Tennessee Tonic makes a high-energy protein drink. The selling price per gallon is $7.20, and variable cost

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a Sales 720 125000 900000 Variable Costs 432 125000 540000 Contribution Margin 360000 Fixed Costs 31...View the full answer

Cost Accounting Foundations and Evolutions

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