Answer:
1. $4.5
2. 45%
3. 55%
4. $4.50
5. $1,800
6. $3,150
7. $1,750
8. 500 units
9.$5,000
10. 2,300 units
11. $5,000
12. 2
13. 1.5%
Explanation:
1. Contribution margin per unit = Unit sales price - Variable cost per unit
• $10 - $5.5 = $4.5
2. Contribution margin ratio = (sales - variable expense) / Sales
• ($10,000 - $5,500) / $10,000
• $4,500/$10,000
•45%
3.Variable expense ratio = variable cost per unit / Sales per unit
•$5.5/$10 = 55%
4. Net operating income @1,000 - Net operating income @1,001
•@1,000 units
Sales (1,000 x 10) $10,000
Variable expense (1,000 x 5.5) $5,500
Contribution margin $4,500
Less: Fixed Cost $2,250
Net operating income $2,250
•@1,001 units
Sales (1,001 x 10) $10,010
Variable expense (1,001 x 5.5) $5,505.50
Contribution margin $4,504.50
Less: Fixed cost $2,250
Net operating income 2,254.50
Therefore, $2,254.50 - $2,250 = $4.50
5. Sales (900 x 10 ) $9,000
Variable expense (900 x 5.5) $4,950
Contribution margin $ 4,050
Less: Fixed cost $2,250
Total net operating income $1,800
6. Sales (900 x 11.50) $10,350
Variable cost (900 x 5.50) $4,950
Contribution margin $5,400
Less: Fixed cost $2,250
Net operating income $3,150
7. Sales (1,250 x 10) $12,500
Variable cost (1,250 x 6) $7,500
Contribution margin $5,000
Less: Fixed cost (2,250 + 1,000) $3,250
Net operating income $1,750
8. Break-even point in unit sales
BEP =Total fixed cost / (sale per unit - variable cost)
BEP = $2,250 / (10-5.5)
BEP = $2,250/$4.5
BEP = 500 units
9.Break-even point in dollar sales
BES = Total fixed expense/contribution margin ratio
BES = $2,250/([10,000-5,500]/10,000)
BES = $2,250/0.45
BES = $5,000
10. Let’s begin with the desired net operating income.
•$8,100 + Fixed cost = Contribution margin / (Sales per unit - Variable cost)
•$8,109 + $2,250 = $10,350/(10-5.50)
•$10,350/4.50
•2,300 units
11.Margin of safety = Projected sales - Break-even sales
MOS = $10,000(1,000 x 10) - $5,000 (as computed above #9)
MOS = $5,000
12. Degree of Operating leverage
DoL = (Sales-Variable cost) / (Sales - Variable cost - Fixed cost)
DoL = ($10,000 - 5,500) / ($10,000 - 5,500 - 2,250)
DoL = $4,500/$2,250
DoL = 2
13. 3% / 2 = 1.5%
• DoL simply signifies how many times the operating profit increase or decrease in relation to sales.
