Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 1,000,000 500,000 500,000 200,000 $ 300,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio?

Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 1,000,000 500,000 500,000 200,000 $ 300,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio?

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 18E

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Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 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 $ 1,920,000 960,000 960,000 160,000 $ 800,000 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. Assume this year's unit sales and total sales increase by 42,000 units and $3,360,000, respectively. If the 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 unit sales to increase by 11%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the…
Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 1,000,000 500,000 500,000 200,000 $ 300,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio?
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Sales $ 2,160,000 Variable expenses 1,080,000 Contribution margin 1,080,000 Fixed expenses 200,000 Net operating income $ 880,000 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 $50,000 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 18%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? 5. The sales manager is…
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Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 2,160,000 Variable expenses 1,080,000 Contribution margin 1,080,000 Fixed expenses 180,000 Net operating income $ 900,000 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. Assume this year’s unit sales and total sales increase by 59,000 units and $4,720,000, respectively. If the 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 unit sales to increase by 13%. Using the degree of operating leverage from last year, what percentage increase in net…
Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable expenses are $12 per unit, and fixed expenses total $140,000 per year. Its operating results for last year were as follows: Sales (24,000 units) 480,000 Variable expenses 288,000 Contribution margin 192,000 Fixed expenses 140,000 Operating income 52,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio?
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Feather Friends, Inc distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40 per unit and fixed expenses total 200000 per year. Its operating results for last year were as follows: Sales 2240000 Variable expenses 1120000 Contribution Margin 1120000 Fixed Expenses 200000 Net Operating income 920000 Answer this question independently based on the original data: Assume this year's unit sales and total sales increase by 54000 units and 4320000 respectively. If the fixed expenses do not change, how much will net operating income increase?
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