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 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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%?
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