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Exercise 7-50 Break-Even Units, Contribution Margin Ratio, Multiple-Product Break-even, Margin of Safety, Degree of Operating Leverage Jellico Inc's projected operating income (based on sales of 450,000 units) for the coming year is as follows: Total Sales $11,700,000 Total variable cost Contribution margin Total fixed cost 8,190,000 $ 3,510,000 2,254,200 Operating income $ 1,255,800 Required: 1. Compute: (a) variable cost per unit, (b) contribution margin per unit, (c) contribution margin ratio, (d) break-even point in units, and (e) break-even point in sales dollars. 2. How many units must be sold to earn operating income of $296,400? 3. Compute the additional operating income that Jellico would earn if sales were $50,000 more than expected. 4. For the projected level of sales, compute the margin of safety in units, and then in sales dollars. 5. Compute the degree of operating leverage. (Note: Round answer to two decimal places.) 6. Compute the new operating income if sales are 10% higher than expected.

Exercise 7-50 Break-Even Units, Contribution Margin Ratio, Multiple-Product Break-even, Margin of Safety, Degree of Operating Leverage Jellico Inc's projected operating income (based on sales of 450,000 units) for the coming year is as follows: Total Sales $11,700,000 Total variable cost Contribution margin Total fixed cost 8,190,000 $ 3,510,000 2,254,200 Operating income $ 1,255,800 Required: 1. Compute: (a) variable cost per unit, (b) contribution margin per unit, (c) contribution margin ratio, (d) break-even point in units, and (e) break-even point in sales dollars. 2. How many units must be sold to earn operating income of $296,400? 3. Compute the additional operating income that Jellico would earn if sales were $50,000 more than expected. 4. For the projected level of sales, compute the margin of safety in units, and then in sales dollars. 5. Compute the degree of operating leverage. (Note: Round answer to two decimal places.) 6. Compute the new operating income if sales are 10% higher than expected.

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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**Exercise 7-50: Break-Even Units, Contribution Margin Ratio, Multiple-Product Break-even, Margin of Safety, Degree of Operating Leverage** Jellico Inc.'s projected operating income (based on sales of 450,000 units) for the coming year is as follows: | | Total | |-----------------------|--------------| | **Sales** | $11,700,000 | | **Total variable cost** | $8,190,000 | | **Contribution margin** | $3,510,000 | | **Total fixed cost** | $2,254,200 | | **Operating income** | $1,255,800 | **Required:** 1. Compute: - (a) Variable cost per unit - (b) Contribution margin per unit - (c) Contribution margin ratio - (d) Break-even point in units - (e) Break-even point in sales dollars 2. How many units must be sold to earn an operating income of $296,400? 3. Compute the additional operating income that Jellico would earn if sales were $50,000 more than expected. 4. For the projected level of sales, compute the margin of safety in units, and then in sales dollars. 5. Compute the degree of operating leverage. *(Note: Round answer to two decimal places.)* 6. Compute the new operating income if sales are 10% higher than expected.
Transcribed Image Text:**Exercise 7-50: Break-Even Units, Contribution Margin Ratio, Multiple-Product Break-even, Margin of Safety, Degree of Operating Leverage** Jellico Inc.'s projected operating income (based on sales of 450,000 units) for the coming year is as follows: | | Total | |-----------------------|--------------| | **Sales** | $11,700,000 | | **Total variable cost** | $8,190,000 | | **Contribution margin** | $3,510,000 | | **Total fixed cost** | $2,254,200 | | **Operating income** | $1,255,800 | **Required:** 1. Compute: - (a) Variable cost per unit - (b) Contribution margin per unit - (c) Contribution margin ratio - (d) Break-even point in units - (e) Break-even point in sales dollars 2. How many units must be sold to earn an operating income of $296,400? 3. Compute the additional operating income that Jellico would earn if sales were $50,000 more than expected. 4. For the projected level of sales, compute the margin of safety in units, and then in sales dollars. 5. Compute the degree of operating leverage. *(Note: Round answer to two decimal places.)* 6. Compute the new operating income if sales are 10% higher than expected.
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