Question

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

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Answer 1.

Number of units sold = Sales / Selling Price per unit
Number of units sold = $1,920,000 / $80
Number of units sold = 24,000

Contribution Margin Ratio = Contribution Margin / Sales
Contribution Margin Ratio = $960,000 / $1,920,000
Contribution Margin Ratio = 50%

Answer 2.

Breakeven in dollar sales = Fixed Expenses / Contribution Margin Ratio
Breakeven in dollar sales = $200,000 / 0.50
Breakeven in dollar sales = $400,000

Answer 3.

Increase in Sales = $43,000

Increase in Net Operating Income = Increase in Sales * Contribution Margin Ratio
Increase in Net Operating Income = $43,000 * 50%
Increase in Net Operating Income = $21,500

Answer 4-a.

Degree of Operating Leverage = Contribution Margin / Net Operating Income
Degree of Operating Leverage = $960,000 / $760,000
Degree of Operating Leverage = 1.26

Answer 4-b.

% Increase in Sales = 12.00%

Degree of Operating Leverage = % Increase in Net Operating Income / % Increase in Sales
1.26 = % Increase in Net Operating Income / 12.00%
% Increase in Net Operating Income = 15.12%

Answer 5.

Selling Price per unit = $80 - 12% * $80
Selling Price per unit = $70.40

Variable Expense per unit = $40.00

Fixed Expenses = $200,000 + $67,000
Fixed Expenses = $267,000

Number of units sold = 24,000 + 25% * 24,000
Number of units sold = 30,000

$ $ Income Statement Sales (30,000 * $70.40) Variable expenses (30,000 * $40.00) Contribution margin Fixed expenses Net opera

No, the manager should not implement these changes as net operating income will decrease by $115,000

Answer 6.

Selling Price per unit = $80.00

Variable Expense per unit = $40.00 + $1.50
Variable Expense per unit = $41.50

Let increase in advertising be $x

Fixed Expenses = $200,000 + $x

Number of units sold = 24,000 + 25% * 24,000
Number of units sold = 30,000

Net Operating Income = Sales - Variable Expenses - Fixed Expenses
Net Operating Income = Selling Price per unit * Number of units sold - Variable Expense per unit * Number of units sold - Fixed Expenses
$760,000 = $80.00 * 30,000 - $41.50 * 30,000 - ($200,000 + $x)
$760,000 = $2,400,000 - $1,245,000 - $200,000 - $x
$x = $195,000

Increase in advertising expense is $195,000

Add a comment
Know the answer?
Add Answer to:
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses...

    Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Sales $ 2,080,000 Variable expenses 1,040,000 Contribution margin 1,040,000 Fixed expenses 200,000 Net operating income $ 840,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point...

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

    Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income $2,160,000 1,080,000 1,080,000 200,000 $ 880,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in...

  • Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...

    Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Sales $ 960,000 Variable expenses 480,000 Contribution margin 480,000 Fixed expenses 200,000 Net operating income $ 280,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point...

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

    Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: sales Variable expenses Contribution margin Fixed expenses Net operating income $ 1,920, eee 960, eee 960, eee 2ee, eee 760,eee Required: Answer each question Independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine...

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

    Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 2,000,000 Variable expenses 1,000,000 Contribution margin 1,000,000 Fixed expenses 180,000 Net operating income $ 820,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point...

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

    Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 2,160,000 Variable expenses 1,080,000 Contribution margin 1,080,000 Fixed expenses 180,000 Net operating income $ 900,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point...

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

    Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 2,160,000 1,080,000 1,080,000 180,000 $ 900,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point...

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

    Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 2,160,000 Variable expenses 1,080,000 Contribution margin 1,080,000 Fixed expenses 180,000 Net operating income $ 900,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point...

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

    Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 2,080,000 Variable expenses 1,040,000 Contribution margin 1,040,000 Fixed expenses 180,000 Net operating income $ 860,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point...

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

    Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 2,160,000 Variable expenses 1,080,000 Contribution margin 1,080,000 Fixed expenses 180,000 Net operating income $ 900,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT