Q No. 1: Oslo Company prepared the following contribution format income statement based on a sales volume of 2,000 units (the relevant range of production is 1500 units to 2,500 units): Sales 50,000 Less: Variable Expenses Contribution Margin Less: Fixed Expenses Net Operation Income 28,000 22,000 12,000 10,000 Required: (Answer each question independently and always refer to the original data unless instructed otherwise.) a. What is the contribution margin per unit and contribution margin ratio? b. If sales increase to 2,005 units, what would be the increase in net operating income? c. If sales decline to 1500 units, what would be the net operating income? d. If the variable cost per unit increases by $2, spending on advertising increases by $2,500, and unit sales increase by 500 units, what would be the net operating income? e. What is the break-even point in unit sales and in dollar sales? f. How many units must be sold to achieve a target profit of $17,500? g. What is the margin of safety in dollars? What is the margin of safety percentage? h. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 7.5% increase in sales?
Q No. 1: Oslo Company prepared the following contribution format income statement based on a sales volume of 2,000 units (the relevant range of production is 1500 units to 2,500 units): Sales 50,000 Less: Variable Expenses Contribution Margin Less: Fixed Expenses Net Operation Income 28,000 22,000 12,000 10,000 Required: (Answer each question independently and always refer to the original data unless instructed otherwise.) a. What is the contribution margin per unit and contribution margin ratio? b. If sales increase to 2,005 units, what would be the increase in net operating income? c. If sales decline to 1500 units, what would be the net operating income? d. If the variable cost per unit increases by $2, spending on advertising increases by $2,500, and unit sales increase by 500 units, what would be the net operating income? e. What is the break-even point in unit sales and in dollar sales? f. How many units must be sold to achieve a target profit of $17,500? g. What is the margin of safety in dollars? What is the margin of safety percentage? h. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 7.5% increase in sales?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Q No. 1: Oslo Company prepared the following contribution format income
statement based on a sales volume of 2,000 units (the relevant range of production
is 1500 units to 2,500 units):
50,000
28,000
22,000
Sales
Less: Variable Expenses
Contribution Margin
Less: Fixed Expenses
Net Operation Income
12,000
10,000
Required:
(Answer each question independently and always refer to the original data unless
instructed otherwise.)
a. What is the contribution margin per unit and contribution margin ratio?
b. If sales increase to 2,005 units, what would be the increase in net operating
income?
c. If sales decline to 1500 units, what would be the net operating income?
d. If the variable cost per unit increases by $2, spending on advertising
increases by $2,500, and unit sales increase by 500 units, what would be the
net operating income?
e. What is the break-even point in unit sales and in dollar sales?
f. How many units must be sold to achieve a target profit of $17,500?
g. What is the margin of safety in dollars? What is the margin of safety
percentage?
h. Using the degree of operating leverage, what is the estimated percent
increase in net operating income of a 7.5% increase in sales?
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