Required: 5. Refer to the original data. During the first year, the store sold only 3,000 pairs of sandals and reported the following operating results: Sales (3,000 pairs) Variable expenses Contribution margin Fixed expenses Net operating income $ 84,000 42,000 42,000 28,000 $ 14,000 a. What is the store's degree of operating leverage? b. Angie is confident a more intense sales effort and with a more creative advertising program will increase unit sales by 50% next year. Using the degree of operating leverage, what would be the expected percentage increase in net operating income if Angie is able to increase unit sales by 50%? a. Degree of operating leverage b. Expected percentage increase in net operating income %
Required: 5. Refer to the original data. During the first year, the store sold only 3,000 pairs of sandals and reported the following operating results: Sales (3,000 pairs) Variable expenses Contribution margin Fixed expenses Net operating income $ 84,000 42,000 42,000 28,000 $ 14,000 a. What is the store's degree of operating leverage? b. Angie is confident a more intense sales effort and with a more creative advertising program will increase unit sales by 50% next year. Using the degree of operating leverage, what would be the expected percentage increase in net operating income if Angie is able to increase unit sales by 50%? a. Degree of operating leverage b. Expected percentage increase in net operating income %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
9
![Required Information
Problem 5-30 (Algo) Graphing; Incremental Analysis; Operating Leverage [LO5-3, LO5-4, LO5-6, LO5-
7, LO5-8]
[The following information applies to the questions displayed below.]
Angie Silva recently opened The Sandal Shop in Brisbane, Australia, a store specializing in fashionable sandals. In
time, she hopes to open a chain of sandal shops. As a first step, she gathered the following data for her new store:
Sales price per pair of sandals
Variable expenses per pair of sandals
Contribution margin per pair of sandals
Fixed expenses per year:
Building rental
Equipment depreciation
Selling
Administrative
Total fixed expenses
$ 28
14
$ 14
$ 4,200
4,200
7,000
12,600
$ 28,000
Problem 5-30 (Algo) Part 5
Required:
5. Refer to the original data. During the first year, the store sold only 3,000 pairs of sandals and reported the following operating
results:
Sales (3,000 pairs)
Variable expenses
Contribution margin
Fixed expenses
$ 84,000
42,000
42,000
28,000
Net operating income
$ 14,000
a. What is the store's degree of operating leverage?
b. Angie is confident a more intense sales effort and with a more creative advertising program will increase unit sales by 50% next
year. Using the degree of operating leverage, what would be the expected percentage increase in net operating income if Angie is
able to increase unit sales by 50%?
a. Degree of operating leverage
b. Expected percentage increase in net operating income
96](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa67d70cf-568c-4c25-b78c-f15f225576f5%2Fc2d3be96-c6ae-41b3-b2d0-b431341c77fb%2Fnbrdkel_processed.png&w=3840&q=75)
Transcribed Image Text:Required Information
Problem 5-30 (Algo) Graphing; Incremental Analysis; Operating Leverage [LO5-3, LO5-4, LO5-6, LO5-
7, LO5-8]
[The following information applies to the questions displayed below.]
Angie Silva recently opened The Sandal Shop in Brisbane, Australia, a store specializing in fashionable sandals. In
time, she hopes to open a chain of sandal shops. As a first step, she gathered the following data for her new store:
Sales price per pair of sandals
Variable expenses per pair of sandals
Contribution margin per pair of sandals
Fixed expenses per year:
Building rental
Equipment depreciation
Selling
Administrative
Total fixed expenses
$ 28
14
$ 14
$ 4,200
4,200
7,000
12,600
$ 28,000
Problem 5-30 (Algo) Part 5
Required:
5. Refer to the original data. During the first year, the store sold only 3,000 pairs of sandals and reported the following operating
results:
Sales (3,000 pairs)
Variable expenses
Contribution margin
Fixed expenses
$ 84,000
42,000
42,000
28,000
Net operating income
$ 14,000
a. What is the store's degree of operating leverage?
b. Angie is confident a more intense sales effort and with a more creative advertising program will increase unit sales by 50% next
year. Using the degree of operating leverage, what would be the expected percentage increase in net operating income if Angie is
able to increase unit sales by 50%?
a. Degree of operating leverage
b. Expected percentage increase in net operating income
96
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