Chapter 5: Applying Excel Data Unit sales Selling price per unit Variable expenses per unit Fixed expenses Enter a formula into each of the cells marked with a ? below Review Problem: CVP Relationships Compute the CM ratio and variable expense ratio Selling price per unit Variable expenses per unit Contribution margin per unit CM ratio Variable expense ratio Compute the break-even point Break-even in unit sales Break-even in dollar sales Compute the margin of safety Margin of safety in dollars Margin of safety percentage Compute the degree of operating leverage Sales Variable expenses Contribution margin Fixed expenses Net operating income Percentage increase in net operating income A 1 Chapter 5: Applying Excel 2 3 Data 4 Unit sales 5 Selling price per unit 6 Variable expenses per unit 7 Fixed expenses $ B Net operating income (los) $ $ $ $ 135,000 C 36,000 units 10 per unit 4 per unit 20,000 units $240,000 $60 per unit $45 per unit $60 per unit $45 per unit $15 per unit 25% 75% a) What is net operating income? Note: Negative amount should be indicated by a minus sign. 16.000 units $960,000 $240,000 20% 1,200,000 $900,000 300.000 270,000 30,000 10.00 2. Change all of the numbers in the data area of your worksheet so that it looks like this: A 1 Chapter 5: Applying Excel 2 3 4 5 6 7 Data Unit sales Selling price per unit Variable expenses per unit Fixed expenses Degree of operating leverage 3. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%. Break-even in dollar sales 4. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20% so that the Data area looks ike this: B (b) What is the margin of safety percentage? Margin of safety percentage $ S $135.000 30,000 units If your formulas are correct, you should get the correct answers to the following questions. (a) What is the break-even in dollar sales? 10 per unit 4 per unit (c) What is the degree of operating leverage? Note: Round your answer to 2 decimal places. с 5. Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930s. The retro-look cycle would be sold for $17,000, and at that price. Thad estimates he could sell 700 units each year. The variable cost to produce and sell the cycles would be $12.750 per unit. The annual fixed cost would be $2.826.250. a. What is the break-even in unit sales? Break-even in unit sales b. What is the margin of safety in dollars? Margin of safety in dollars I c. What is the degree of operating leverage? Note: Round your answer to 2 decimal places. Degree of operating leverage d. Thad is worried about the selling price. Rumors are circulating that other retro brands of cycles may be revived. If so, the selling price for the Western Hombre would have to be reduced to $15,500 to compete effectively. In that event. Thad also would reduce fixed expenses to $2.290,250 by reducing advertising expenses, but he still hopes to sell 700 units per year. What would the net operating income be in this situation? Note: Negative amount should be indicated by a minus sign.

Chapter 5: Applying Excel Data Unit sales Selling price per unit Variable expenses per unit Fixed expenses Enter a formula into each of the cells marked with a ? below Review Problem: CVP Relationships Compute the CM ratio and variable expense ratio Selling price per unit Variable expenses per unit Contribution margin per unit CM ratio Variable expense ratio Compute the break-even point Break-even in unit sales Break-even in dollar sales Compute the margin of safety Margin of safety in dollars Margin of safety percentage Compute the degree of operating leverage Sales Variable expenses Contribution margin Fixed expenses Net operating income Percentage increase in net operating income A 1 Chapter 5: Applying Excel 2 3 Data 4 Unit sales 5 Selling price per unit 6 Variable expenses per unit 7 Fixed expenses $ B Net operating income (los) $ $ $ $ 135,000 C 36,000 units 10 per unit 4 per unit 20,000 units $240,000 $60 per unit $45 per unit $60 per unit $45 per unit $15 per unit 25% 75% a) What is net operating income? Note: Negative amount should be indicated by a minus sign. 16.000 units $960,000 $240,000 20% 1,200,000 $900,000 300.000 270,000 30,000 10.00 2. Change all of the numbers in the data area of your worksheet so that it looks like this: A 1 Chapter 5: Applying Excel 2 3 4 5 6 7 Data Unit sales Selling price per unit Variable expenses per unit Fixed expenses Degree of operating leverage 3. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%. Break-even in dollar sales 4. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20% so that the Data area looks ike this: B (b) What is the margin of safety percentage? Margin of safety percentage $ S $135.000 30,000 units If your formulas are correct, you should get the correct answers to the following questions. (a) What is the break-even in dollar sales? 10 per unit 4 per unit (c) What is the degree of operating leverage? Note: Round your answer to 2 decimal places. с 5. Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930s. The retro-look cycle would be sold for $17,000, and at that price. Thad estimates he could sell 700 units each year. The variable cost to produce and sell the cycles would be $12.750 per unit. The annual fixed cost would be $2.826.250. a. What is the break-even in unit sales? Break-even in unit sales b. What is the margin of safety in dollars? Margin of safety in dollars I c. What is the degree of operating leverage? Note: Round your answer to 2 decimal places. Degree of operating leverage d. Thad is worried about the selling price. Rumors are circulating that other retro brands of cycles may be revived. If so, the selling price for the Western Hombre would have to be reduced to $15,500 to compete effectively. In that event. Thad also would reduce fixed expenses to $2.290,250 by reducing advertising expenses, but he still hopes to sell 700 units per year. What would the net operating income be in this situation? Note: Negative amount should be indicated by a minus sign.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Transcribed Image Text:Chapter 5: Applying Excel Data Unit sales Selling price per unit Variable expenses per unit Fixed expenses Enter a formula into each of the cells marked with a ? below Review Problem: CVP Relationships Compute the CM ratio and variable expense ratio Selling price per unit Variable expenses per unit Contribution margin per unit CM ratio Variable expense ratio Compute the break-even point Break-even in unit sales Break-even in dollar sales Compute the margin of safety Margin of safety in dollars Margin of safety percentage Compute the degree of operating leverage Sales Variable expenses Contribution margin Fixed expenses Net operating income Percentage increase in net operating income 1 2 3 4 5 6 7 A Chapter 5: Applying Excel Data Unit sales Selling price per unit Variable expenses per unit Fixed expenses $ B Net operating income (loss) $ $ $ $ 135,000 C 36,000 units % 10 per unit 4 per unit 20,000 units $240,000 $60 per unit $45 per unit $60 per unit $45 per unit $15 per unit 25% 75% 16,000 units $960,000 (a) What is net operating income? Note: Negative amount should be indicated by a minus sign. $240,000 20% 1,200,000 $900,000 300,000 270,000 30,000 2. Change all of the numbers in the data area of your worksheet so that it looks like this: Degree of operating leverage 3. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%. 10.00 A 1 Chapter 5: Applying Excel 2 3 4 5 6 7 Data Unit sales Selling price per unit Variable expenses per unit Fixed expenses Break-even in dollar sales 4. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20% so that the Data area looks like this: (b) What is the margin of safety percentage? Margin of safety percentage B $ $ $ 135,000 If your formulas are correct, you should get the correct answers to the following questions. (a) What is the break-even in dollar sales? % 30,000 units 10 per unit 4 per unit (c) What is the degree of operating leverage? Note: Round your answer to 2 decimal places. C 5. Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930s. The retro-look cycle would be sold for $17,000, and at that price, Thad estimates he could sell 700 units each year. The variable cost to produce and sell the cycles would be $12,750 per unit. The annual fixed cost would be $2,826,250. a. What is the break-even in unit sales? Break-even in unit sales b. What is the margin of safety in dollars? Margin of safety in dollars c. What is the degree of operating leverage? Note: Round your answer to 2 decimal places. Degree of operating leverage d. Thad is worried about the selling price. Rumors are circulating that other retro brands of cycles may be revived. If so, the selling price for the Western Hombre would have to be reduced to $15,500 to compete effectively. In that event, Thad also would reduce fixed expenses to $2,290,250 by reducing advertising expenses, but he still hopes to sell 700 units per year. What would the net operating income be in this situation? Note: Negative amount should be indicated by a minus sign.

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