**Problem 5-30 (Static) Part 5**5. Refer to the original data. During the first year, the store sold only 3,000 pairs of sandals and reported the following operating results:- Sales (3,000 pairs): $120,000- Variable expenses: $48,000- Contribution margin: $72,000- Fixed expenses: $60,000- Net operating income: $12,000**Questions:**a. What is the store’s degree of operating leverage?b. Angie is confident that with a more intense sales effort and with a more creative advertising program she can increase unit sales by 50% next year. Using the degree of operating leverage, what would be the expected percentage increase in net operating income if Angie is able to increase unit sales by 50%?---**Answers:**a. Degree of operating leverage: [Blank for answer]b. Expected percentage increase in net operating income: [Blank for answer]%---This section assesses the understanding of operating leverage and its impact on profitability with changes in sales volume. ### Problem 5-30: Graphing; Incremental Analysis; Operating Leverage**Context:**Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, specializing in fashionable sandals. She aims to expand into a chain and has collected the following data for her new store:**Financial Information:**- **Sales price per pair of sandals:** $40- **Variable expenses per pair of sandals:** $16- **Contribution margin per pair of sandals:** $24**Fixed Expenses Per Year:**- **Building rental:** $15,000- **Equipment depreciation:** $7,000- **Selling:** $18,000- **Administrative:** $20,000- **Total fixed expenses:** $60,000---### Problem 5-30 (Static) Part 5**Scenario:**During the first year, the store sold 3,000 pairs of sandals with the following results:- **Sales (3,000 pairs):** $120,000- **Variable expenses:** $48,000- **Contribution margin:** $72,000- **Fixed expenses:** $60,000- **Net operating income:** $12,000**Questions:**a. **Degree of Operating Leverage:** What is the store's degree of operating leverage?b. **Sales and Operating Income Projection:** Angie is confident that with improved sales efforts and a creative advertising program, she can increase sales by 50% next year. If unit sales increase by 50%, what would be the expected percentage increase in net operating income?--- This section guides learners to analyze financial strategies in business operations, specifically examining the impact of sales changes on cost structure and profitability.

Degree of operating leverage is an important ratio which shows that how much the earnings before…

Answered: 5. Refer to the original data. During…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cymbal E-Motors is a fast-growing start-up firm that manufactures electric motors for bicycles. The following Income statement is avallable for April: Sales revenue (800 units @ $1,200 per unit) Less Manufacturing costs Variable costs Depreciation (fixed) Marketing and administrative costs Fixed costs (cash) Depreciation (fixed) Total costs Operating profits $ 960,000 60,800 54,000 124,500 62,000 $ 301,300 $ 658,700 Sales volume is expected to increase by 30 percent in May, but the sales price is expected to fall 5 percent. Varlable manufacturing costs are expected to Increase by 7.5 percent per unit in May. In addition to these cost changes, variable manufacturing costs also will change with sales volume. Marketing and administrative cash costs are expected to increase by 15 percent. All revenues and costs at Cymbal are cash transactions, except for depreciation. Cymbal maintains no Inventories. Depreciation is fixed and is forecast to remain unchanged in the next six months.…
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Please help me with this accounting homework question, I am having so much trouble.
to breakeven? *continuation* show complete solution on paper
What is Nancy’s degree of operating leverage?
3) A shoe retailer plans, for the period, net sales of $3,000,000 with a 20% profit and 25% operating expenses. The anticipated markdowns are 15%, along with sales discounts at 2% and shortages of 3%. Cash discounts to be earned are estimated at 5%, and alterations are 1% of net sales. What initial markup % is needed for this retailer's merchandise to achieve the desired profit goal?
In some business models, like restaurants, revenue determines expenses. For example, a restaurant owner may find that labor and food costs should each be 30% of total revenue for the business model to work. As you run your business over time, you'll see certain patterns and limitations (e.g. cafes only have a certain number of seats) -- patterns in revenue to determine expenses. Please review and analyze the Financial Statement Model and explain each component in Dark Blue Such as % Growth per month, Revenue, Expenses, Operating Cash Flow, etc.
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company's products is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data: Product Demand Next year (units) Debbie Trish Sarah Mike Sewing kit Selling Price per Unit $ 15.50 $ 6.00 51,000 43,000 $ 25.00 36,000 40,000 $ 11.00 326,000 $ 8.10 The following additional information is available: Direct Materials $ 4.40 $ 1.20 $6.59 $ 2.10 $ 3.30 Direct Labor $ 2.70 $ 1.20 $ 4.50 $ 3.30 $0.90 a. The company's plant has a capacity of 118,450 direct labor-hours per year on a single-shift basis. The company's present employees and equipment can produce all five products. b. The direct labor rate of $6 per hour is expected to remain unchanged during the coming year. c. Fixed manufacturing costs total $530,000 per year. Variable overhead costs are $3 per direct labor-hour. d. All of the…
A successful franchise owner of a prestigious sporting goods chain is feeling the effects of technology, with more and more online sales and less and less customers in the shops. Locally there are three stores, and typically each store needs the following positions staffed for optimum profitability and success: a store manager an assistant manager five department managers and 20 customer service representatives, Averaging $1 200 000 in annual revenue. However, there has been a trend of 20 percent sales decline in stores, with an increase of 30 percent sales online (last year the online revenue stream was $300 000). The franchise owner was able to handle all of the online sales with a team of five full-time remote workers (working from home) last year. The owner wants each store to maintain its productivity, which he measures as the revenue per employee. He also thinks that there is potential to grow the online business. Please help the owner by answering the following questions.…
If Anna Cullumber, the company’s president, is successful in increasing sales revenue by 5%, by what percent will the company’s operating income increase?
B.17.

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