Yu28. 4Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit,and fixed expenses total $160,000 per year. Its operating results for last year were as follows:5 04:52:07SalesVariable expenses.Contribution marginFixed expensesNet operating income$3,000,0001,500,0001,500,000160,000$ 1,340,000Required:Answer each question independently based on the original data:1. What is the product's CM ratio?2. Use the CM ratio to determine the break-even point in dollar sales.3. If this year's sales increase by $59,000 and fixed expenses do not change, how much will net operating income increase?4-a. What is the degree of operating leverage based on last year's sales?4-b. Assume the president expects this year's sales to increase by 12%. Using the degree of operating leverage from last year, whatpercentage increase in net operating income will the company realize this year?5. The sales manager is convinced that a 14% reduction in the selling price, combined with a $74,000 increase in advertising, wouldincrease this year's unit sales by 25%.a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented?b. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year?6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.70 per unit. Hethinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could thepresident increase this year's advertising expense and still earn the same $1,340,000 net operating income as last year?

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Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin. Fixed expenses Net operating income $3,000,000 1,500,000 1,500,000 160,000 $ 1,340,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. If this year's sales increase by $59,000 and fixed expenses do not change, how much will net operating income increase?

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin. Fixed expenses Net operating income $3,000,000 1,500,000 1,500,000 160,000 $ 1,340,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. If this year's sales increase by $59,000 and fixed expenses do not change, how much will net operating income increase?

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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