If you don't want to purchase individual stocks, bonds, and other investments, you can get them packaged together in a__

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per

Blizzard [7]

Answer:

a. Degree of operating leverage is 1.23; and Percentage increase in net income is 23.37%.

b. Therefore, this year's net operating income would be $636,000 if the sales manager's ideas are implemented.

Explanation:

a. Assume the president expects this year's sales to increase by 19%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year?

The degree of operating leverage (DOL) refers to a metric used to gauge the amount by which the operating income of a firm will change as a result of a change in its sales. DOL can be calculated as follows:

Degree of operating leverage = contribution margin / net income = 960,000 / 780,000 = 1.23

From the DOL, the percentage increase in net income can can be determined as follows:

Percentage increase in net income = Degree of operating leverage * Expected percentage increase in net income = 1.23 * 19% = 23.37%

b. If the sales manager is right, what would be this year's net operating income if his ideas are implemented?

Note: This required part b is not complete. The complete requirement is therefore presented as follows:

The sales manager is convinced that a 13% reduction in the selling price, combined with a $72,000 increase in advertising, would increase this year's unit sales by 25%. If the sales manager is right, what would be this year's net operating income if his ideas are implemented?

The answer to par b is now provided as follows:

Initial sales in unit = Initial sales / Initial selling price = $1,920,000 / $80 = 24,000 units

This year's sales in unit = Initial sales in unit * (100% + percentage increase in sales) = 24,000 * 125% = 30,000 units

This year's sales = This year's sales in unit * [Old selling price * (100% - expected percentage fall in selling price)] = 30,000 * [$80 * (100% - 13%)] = $2,088,000

This year's operating income can now be determined as follows:

Feather Friends, Inc.

Income Statement (Variable Costing)

For this year

Particulars Amount ($)

Sales 2,088,000

Variable expense (30,000 * $40) (1,200,000)

Contribution margin 888,000

Fixed expense (180,000 + 72,000) (252,000)

Net operating income  636,000 

Therefore, this year's net operating income would be $636,000 if the sales manager's ideas are implemented.

5 0

3 years ago

If you were selling a product with an elasticity of 1.6 and you wanted to increase your revenue, what should you do to the price

docker41 [41]

Answer:

If the product we are selling has an elasticity of 1.6 we should lower the price to increase revenues

Explanation:

Elasticy in demand above 1 means that are elastic goods. So the percentage in the rise in the quantity demanded is superior to the percentage in the fall of the price, so it will increase revenues.

7 0

3 years ago

Sally received 100 shares of stock worth $8,000 as a gift from her father. Her father had purchased the stock for $10,000. When

yawa3891 [41]

Answer:

$8000

Explanation:

Based on the fact that she didn't purchase the stock initially At $10000, but she was gifted it at $8000 her bases upon which she will derive profit or loss from is $8000

3 0

3 years ago

Select the correct answer.

OLga [1]

Conduct regular development programs for employees!

4 0

3 years ago

Daves Inc. recently hired you as a consultant to estimate the company’s Weighted Average Cost of Capital. You have obtained the

puteri [66]

Answer:

WACC = 5.32%

Explanation:

bond's YTM = 8%

cost of equity = 10%

tax rate = 40%

total bonds = $900,000,000

total common stocks = $100,000,000

total firm's value = $1,000,000,000

to simplify the process I will use hundreds of millions

WACC = (1/10 x 10%) + [9/10 x 8% x (1 - 40%)] = 1% + 4.32% = 5.32%

8 0

3 years ago

If you don't want to purchase individual stocks, bonds, and other investments, you can get them packaged together in a___?