Answer Happy

Blue company has prepared the following
contribution format income statement basedon a sales volume of
1,000 units (the relevant range of production is 500 to 1,500
units):













Sales
$
20,000









Variable expenses


12,000









Contribution margin


8,000









Fixed expenses


6,000









Net operating income

$
2,000




















Questions:














5. If sales decline to 900 units, what would be the
net operating income? Computed as follows


6. If the selling price increases by $2 per unit
and thes ales volume decreases by 100 units, what would be the net
operating income? Computed as follows


7. If the variable cost per unit increases by $1,
spending on advertising incrases by $1,500, and unit sales incrase
by 250 units, what would be the net operating income? Computed as
follows


8. What is the break-even point in unit sales?
Calculated as follows


9. What is the break-even point in dollar sales?
Calculated as follows


10. How many units must be sold to achieve a target
profit of $5,000? Calculated as follows


11. What is the margin of safety in dollars?
Calculated as follows


12. What is the degree of operating leverage?
Calculated as follows