Stratford Company distributes a lightweight lawn chair thath sells for $30 per unit. Variable expenses are 20% of sales and fixed expenses total $595,200 annually. sub question 4 and 5 Submit4. Assume that the operating results for last year were as follows:SalesLess: Variable expensesContribution marginLess: Fixed expenses$ 930, 000186,000744,000595, 200Net operating income$ 148,800a. Compute the degree of operating leverage at the current level of sales. (Round your answer to 1 decimal place.)Degree of operating leverageb. The president expects sales to increase by 30% next year. By how much should net operating income increase?Increase in operating income 5-a. Refer to the original data. Assume that the company sold 32,000 units last year. The sales manager is convinced that a 8%reduction in the selling price, combined with a $144,000 increase in advertising expenditures, would increase annual unit sales by40%. Prepare two contribution format income statements: one showing the results of last year's operations, and one showing what theresults of operations would be if these changes were made. (Do not round intermediate calculations. Round "Per Unit" answers to 2decimal places.)Last YearProposedTotalPer UnitTotalPer UnitSalesb. Would you recommend that the company do as the sales manager suggests?

Operating Leverage = Contribution / Net operating income Also, Operating Leverage = Percentage…

Answered: Stratford Company distributes a…

Stratford Company distributes a lightweight lawn chair thath sells for $30 per unit. Variable expenses are 20% of sales and fixed expenses total $595,200 annually.

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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