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raketka [301]
2 years ago
12

sells authentic Amish quilts on her website. Suppose Sally expects to sell 1 comma 800 quilts during the coming year. Her averag

e sales price per quilt is $ 350​, and her average cost per quilt is $ 150. Her fixed expenses total $ 135 comma 000. Compute Sally​'s operating leverage factor at an expected sales level of 1 comma 800 quilts. If sales volume increases 15​%, by what percentage will her operating income​ change? Prove your answer by calculating operating income at a sales volume of 1 comma 800 and at a sales volume of 2 comma 070.
Business
2 answers:
fomenos2 years ago
4 0

Answer:

It will increase by 37.5%

Explanation:

<u>we solve for the variable cost first:</u>

135,000 fixed cost / 1,800 units = 75

average cost 150

less unit fixed cost of 75

variable cost 75

contribution: (350 - 75)/ 350 = 0,7857

Now we construct the operating income at the given sales level

sales revenue 1,800 x 350 = 630,000

variable cost 1,800 x 75 =    <u>  (135,000)</u>

contribution                            495,000

fixed  cost                            <u>    135,000  </u>

operating income                  360,000

increase of 15% in sales 1,800  x 1.15 = 2,070

sales revenue 2,070 x 350 =   724,500

variable cost   2.070 x   75  =<u>  (155,250)  </u>

contribution                              569,250

fixed  cost                               <u>  (135,000)  </u>

operating income                     434,250

Now, we solve for the operating leverage

495,000 / 360,000 = 1.375

360,000 x (1 + 1.375 x 0.15) = 434,250

Serjik [45]2 years ago
3 0

Answer:

1) Operating Leverage Factor = Contribution margin / net income

                                                = $360,000 / $225,000

                                                = 1.6

2 ) % change in Net income = 1.6 *15%

                                              =24%

PROOF  

Income Statement                              1,800 units            2,070 units

Sales                                                 $630,000               $724,500

Variable cost                                   -$270,000              -$310,500

Contribution                                     $360,000               $414,000

Fixed Cost                                       -$135,000               -$135,000

Net Income                                       $225,000               $279,000

change = 279,000 - 225,000 = $54,000

% Change = $54,000 / $225,000

                 = 0.24 *100 = 24%

Explanation:

1) Income Statement    

Sales (1,800 *$350)                                                     $630,000

Variable Cost (1,800*$150)                                        -$270,000

Contribution                                                                $360,000

Fixed Cost                                                                 -$135,000

Net Income                                                                 $225,000

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KiRa [710]
<h2>Question:</h2>

Q1. This organizational structure violates the unity of command principles because of dual reporting relationship.

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<h2>Answer:</h2>
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8 0
3 years ago
The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. The
Furkat [3]

The calculated profit per unit for base-case, worst-case is, and best-case for the management of Brinkley corporation is:

  • $7
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  • $3 per unit

<h3>The Profit per unit for base-case:</h3>

45 - 1 1- 24 - 3 = $7

<h3>Profit per unit for worst case:</h3>

45 - 12 - 25 - 3 = $3 per unit

<h3>Profit per unit for best case:</h3>

45 - 10 - 20 - 3 = 12$ per unit

b. The mean profit per unit is given as $7.05

c. The reason the simulation approach is preferable is due to the fact that it can help to determine the probability of profit as a particular amount, unlike the what-if scenario analysis.

It can also create different scenarios for possible resources.

d. The probability of the fact that the profit per unit woul  be less than 5 is 9%

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5 0
2 years ago
Mills Corporation acquired as a long-term investment $200 million of 7% bonds, dated July 1, on July 1, 2018. Company management
Evgen [1.6K]

Answer:

investment on bonds   200 millions

premium on bonds         40 millions

                        cash                            240 millions

to record the purchase of bonds

cash                             7 millions

      interest revenue             6 millions

      premium on bonds         1 million

interest proceeds of december 31th

Balance sheet:

bonds      200

premium    39

net            239

cash                                             250 millions

              investment on bonds                         200 millions

              premium on bonds                               39 millions

              gain on sale of invesment                    11   millions

to record the sale of bonds

                       

Explanation:

<u>recording the bonds:</u>

acquisition             240

bonds face value (200)

premium                  40

It is a premium, as the bonds where purchased at higher price than face value

<u>Interest at December 31th</u>

To calculate the interest, we will calcualte the interest per payment:

7% annual coupon rate /2 payment per year = 3.5% semi-annual rate

5% market rate /2 payment per year = 2.5% semi-annual market rate

cash proceeds: 200 x 3.5% = 7

interest revenue:

carrying value x market rate

240 x 2.5% = 6

amortization 7 - 6 = 1

<u>Value in the balance sheet:</u>

the net value of the bond will be the face value plus the carrying value of the premium

<u>Sale of the bonds:</u>

selling price                           250

carrying value of the bonds (239)

gain on sale of bonds              1 1

It is a gain, as the bonds are being sold at a higher price than his carrying value.

7 0
3 years ago
Melbourne Company uses the perpetual inventory method. Melbourne purchased 500 units of inventory that cost $4.00 each. At a lat
ra1l [238]

Answer:

$1,200

Explanation:

Calculation to determine what the amount of ending inventory appearing on the balance sheet will be:

First step is to determine the units in ending inventory

Units in ending inventory=500 units + 600 units – 800 units sold

Units in ending inventory= 300

Now let determine the Ending inventory

Ending inventory=300 units x $4.00

Ending inventory = $1,200

Therefore the amount of ending inventory appearing on the balance sheet will be:$1,200

5 0
2 years ago
The Acmeville Metropolitan Bus Service currently charges $0.67 for an all-day ticket, and has an average of 513 riders a day. Th
Andreyy89

Answer:

Explanation:

Price elasticity = Percentage change in demand/Percentage change in Price

Percentage change in Q= 513-236=277/513x100 = 53.99%

Percentage change in P= 0.89-0.67= 0.22/0.67x100 = 32.83%

Ed=53.99/32.83 = 1.6

Since the price elasticity of demand is elastic so the company should decrease the price to increase revenu

4 0
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