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Angie Silva recently opened The Sandal Shop in Brisbane, Australia, a store specializing in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she gathered the following data for her new store: Sales price per pair of sandals. Variable expenses per pair of sandals Contribution margin per pair of sandals Fixed expenses per year: Building rental Equipment depreciation. Selling Administrative Total fixed expenses Problem 5-30 (Algo) Part 5 Sales (3,500 pairs) Variable expenses Contribution margin Fixed expenses Net operating income $ 112,000 56,000 56,000 48,000 $ 8,000 Required: 5. Refer to the original data. During the first year, the store sold only 3,500 pairs of sandals and reported the following operating results: $ 32 16 $ 16 $ 9,600 12,000 a. Degree of operating leverage b. Expected percentage increase in net operating income 9,600 16,800 $ 48,000 a. What is the store's degree of operating leverage? b. Angie is confident a more intense sales effort and with a more creative advertising program will 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%? < Prev % 8 of 12 www Next >

Angie Silva recently opened The Sandal Shop in Brisbane, Australia, a store specializing in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she gathered the following data for her new store: Sales price per pair of sandals. Variable expenses per pair of sandals Contribution margin per pair of sandals Fixed expenses per year: Building rental Equipment depreciation. Selling Administrative Total fixed expenses Problem 5-30 (Algo) Part 5 Sales (3,500 pairs) Variable expenses Contribution margin Fixed expenses Net operating income $ 112,000 56,000 56,000 48,000 $ 8,000 Required: 5. Refer to the original data. During the first year, the store sold only 3,500 pairs of sandals and reported the following operating results: $ 32 16 $ 16 $ 9,600 12,000 a. Degree of operating leverage b. Expected percentage increase in net operating income 9,600 16,800 $ 48,000 a. What is the store's degree of operating leverage? b. Angie is confident a more intense sales effort and with a more creative advertising program will 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%? < Prev % 8 of 12 www Next >

FINANCIAL ACCOUNTING
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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Angie Silva recently opened The Sandal Shop in Brisbane, Australia, a store specializing in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she gathered the following data for her new store: Sales price per pair of sandals. Variable expenses per pair of sandals Contribution margin per pair of sandals Fixed expenses per year: Building rental Equipment depreciation. Selling Administrative Total fixed expenses Problem 5-30 (Algo) Part 5 Sales (3,500 pairs) Variable expenses Contribution margin Fixed expenses Net operating income $ 112,000 56,000 56,000 48,000 $ 8,000 Required: 5. Refer to the original data. During the first year, the store sold only 3,500 pairs of sandals and reported the following operating results: $ 32 16 $16 $ 9,600 12,000 a. Degree of operating leverage b. Expected percentage increase in net operating income 9,600 16,800 $ 48,000 a. What is the store's degree of operating leverage? b. Angie is confident a more intense sales effort and with a more creative advertising program will 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%? < Prev % 8 of 12 www Next >
Transcribed Image Text:Angie Silva recently opened The Sandal Shop in Brisbane, Australia, a store specializing in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she gathered the following data for her new store: Sales price per pair of sandals. Variable expenses per pair of sandals Contribution margin per pair of sandals Fixed expenses per year: Building rental Equipment depreciation. Selling Administrative Total fixed expenses Problem 5-30 (Algo) Part 5 Sales (3,500 pairs) Variable expenses Contribution margin Fixed expenses Net operating income $ 112,000 56,000 56,000 48,000 $ 8,000 Required: 5. Refer to the original data. During the first year, the store sold only 3,500 pairs of sandals and reported the following operating results: $ 32 16 $16 $ 9,600 12,000 a. Degree of operating leverage b. Expected percentage increase in net operating income 9,600 16,800 $ 48,000 a. What is the store's degree of operating leverage? b. Angie is confident a more intense sales effort and with a more creative advertising program will 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%? < Prev % 8 of 12 www Next >
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