Answer:
<em>Net operating income = $1,875</em>
Explanation:
<em>The operating leverage is the ratio of Contribution to Net Operating Income. It is used to analyse the cost structure of a business to determine how much of its total cost is fixed.</em>
It is computed as follows:
<em>Operating leverage = Contribution/Net operating income</em>
Contribution = Contribution margin × Sales revenue
= 15% × $150,000
= $22,500
Substitute this into the operating leverage equation
12 = 22,500/ y
y = 22,500/12
y = 1,875
<em>Net operating income = $1,875</em>
Display rules - these are how people are expected to behave and express themselves such as good sportsmanship
Answer:
It is cheaper to produce in-house. Cost savings= $3500
Explanation:
We need to find whether it is better to produce in-house or to purchase to a supplier.
Q= 175000
Produce in house:
Direct Materials $15,000
Direct Labor $5,000
Variable overhead $6,000
Fixed overhead $9,000
Total cost= $35000
Outsource:
Purchase Cost= 175000q*$0.18= $31500
Fixed Cost= (9000-2000)= $7000
Total cost=$38500
It is cheaper to produce in-house. Cost savings= $3500
Answer:
Product A $7.80
Explanation:
Calculation to Determine the most profitable product assuming the machine hours are the constraint.
PRODUCT A PRODUCT B
Contribution margin per unit $85.80 $107.80
÷Machine hours 11 14
=Contribution margin per bottle neck hour
$7.80 $7.70
Based on the above calculation Product A is the most profitable because product A profit Amount of $7.80 is higher than that of product B.