Homework Answers
19.13) Degree of operating leverage
| Before purchase new equipment | after purchase new equipment | |
| Contribution margin | 200000 | 240000 |
| Net operating income | 40000 | 40000 |
| Degree of operating leverage | 200000/40000 = 5 | 240000/40000 = 6 |
Comment = When new equipment purchase fixed also be increased so net income will be same in both situation
19.14) Break even sales
| Diggs Co | Doggs Co | |
| Contribution margin ratio | 120000/200000 = 60% | 150000/200000 = 75% |
| Fixed cost | 75000 | 105000 |
| Break even sales | 75000/.60 = 125000 | 105000/.75 = 140000 |
Comment = Doggs co's break even sales is higher than diggs Co
19.15) Contribution margin for Montana Corp = 50000*1.6 = 80000
Contribution margin for APK Co = 50000*5.4 = 270000
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Product 1 Product 2 Margin $42 $32 Required for Production .15 hours . 10 hours If...
aonnoid nnous ua3npoud uaus BE19.13 (LO 4) Sam's Shingle Corporation is considering the purchase of a...
aonnoid nnous ua3npoud uaus BE19.13 (LO 4) Sam's Shingle Corporation is considering the purchase of a new automated shingle- cutting machine. The new machine will reduce variable labor costs but will increase depreciation expense. Contribution margin is expected to increase from $200,000 to $240,000. Net income is expected to be the same at $40,000. Compute the degree of operating leverage before and after the purchase of the new equipment. Interpret your results.
E19.14 (LO 4) The CVP income statements shown below are available for Armstrong Company and Contador...
E19.14 (LO 4) The CVP income statements shown below are available for Armstrong Company and Contador Company Armstrong Co. Contador Co. Sales $500,000 S500,000 Variable costs 240.000 50.000 Contribution margin 260.000 450,000 Fixed costs 160,000 350,000 Net income $100,000 S100,000 Instructions a. Compute the degree of operating leverage for each company and interpret your results. b. Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each company c. Discuss how the cost structure of these...
The CVP income statements shown below are available for Armstrong Company and Contador Company. Sales Variable...
The CVP income statements shown below are available for Armstrong Company and Contador Company. Sales Variable costs Contribution margin Fixed costs Net income Armstrong Co. Contador Co. $503,000 $503,000 248,000 45,000 255,000 458.000 155,000 358,000 $100,000 $100,000 (a1) Compute the degree of operating leverage for each company. (Round answers to 2 decimal places, e.g. 1.15.) Degree of Operating Leverage Armstrong Contador (b) Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each company. Armstrong Company...
Sales Variable costs Contribution margin Fixed costs Net income $525000 315000 210000 199500 $10500 $525000 262500...
Sales Variable costs Contribution margin Fixed costs Net income $525000 315000 210000 199500 $10500 $525000 262500 262500 252000 $10500 Compute the degree of operating leverage for each company. (Round ans Degree of Operating Leverage Swifty Company Marigold Company
eBook Calculator Margin of Safety and Operating Leverage Medina Company produces a single product. The projected...
eBook Calculator Margin of Safety and Operating Leverage Medina Company produces a single product. The projected income statement for the coming year is as follows: Sales (60,000 units @ $21.00) $1,260,000 Total variable cost 478,800 Contribution margin $ 781,200 Total fixed cost 755,160 Operating income $ 26,040 Required: 1. Compute the break-even sales dollars. 2. Compute the margin of safety in sales dollars 3. Compute the degree of operating leverage! 4. Compute the new operating income if sales are 20%...
Hudson Co. reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement...
Hudson Co. reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (9,800 units at $289 each) Variable costs (9,800 units at $210 each) Contribution margin Fixed costs E Pretax income $2,520,000 1,890,000 $ 630,000 420,000 $ 210,000 1. Compute the company's degree of operating leverage for 2019. 2. If sales decrease by 6% in 2020, what will be the company's pretax income? 3. Assume sales for 2020 decrease...
1.What is the contribution margin per unit? 2.What is the contribution margin ratio? 3.What is the...
1.What is the contribution margin per unit?
2.What is the contribution margin ratio?
3.What is the variable expense ratio?
4.If sales increase to 1,001 units, what would be the increase
in net operating income?
5.If sales decline to 900 units, what would be the net
operating income?
6.If the selling price increases by $2.50 per unit and the
sales volume decreases by 100 units, what would be the net
operating income?
7.If the variable cost per unit increases by $1.50,...
Company A is a manufacturer with sales of $4,000,000 and a 60% contribution margin. Its fixed costs equal $1,800,000. C...
Company A is a manufacturer with sales of $4,000,000 and a 60% contribution margin. Its fixed costs equal $1,800,000. Company B is a consulting firm with service revenues of $3,900,000 and a 25% contribution margin. Its fixed costs equal $400,000. Compute the degree of operating leverage (DOL) for each company. Which company benefits more from a 20% increase in sales Complete this question by entering your answers in the tabs below. Company Benefits DOL Compute the degree of operating leverage...
Questions: 1. What is the meaning of contribution margin ration? How is this ratio useful in...
Questions: 1. What is the meaning of contribution margin ration? How is this ratio useful in planning business operations? 2. In all respects, Company A and Company B are identical except that Company A's costs are mostly variable whereas Company B's costs are mostly fixed. When sales increase, which company will tend to realize the greatest increase in profits? Explain. 3. What is the meaning of operating leverage? 4. What is the meaning of break-even point? Problem: Oslo Company prepared...
Questions: 1. What is the meaning of contribution margin ration? How is this ratio useful in...
Questions: 1. What is the meaning of contribution margin ration? How is this ratio useful in planning business operations? 2. In all respects, Company A and Company B are identical except that Company A's costs are mostly variable whereas Company B's costs are mostly fixed. When sales increase, which company will tend to realize the greatest increase in profits? Explain. 3. What is the meaning of operating leverage? 4. What is the meaning of break-even point? Problem: Oslo Company prepared...
aonnoid nnous ua3npoud uaus BE19.13 (LO 4) Sam's Shingle Corporation is considering the purchase of a new automated shingle- cutting machine. The new machine will reduce variable labor costs but will increase depreciation expense. Contribution margin is expected to increase from $200,000 to $240,000. Net income is expected to be the same at $40,000. Compute the degree of operating leverage before and after the purchase of the new equipment. Interpret your results.
E19.14 (LO 4) The CVP income statements shown below are available for Armstrong Company and Contador Company Armstrong Co. Contador Co. Sales $500,000 S500,000 Variable costs 240.000 50.000 Contribution margin 260.000 450,000 Fixed costs 160,000 350,000 Net income $100,000 S100,000 Instructions a. Compute the degree of operating leverage for each company and interpret your results. b. Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each company c. Discuss how the cost structure of these...
The CVP income statements shown below are available for Armstrong Company and Contador Company. Sales Variable costs Contribution margin Fixed costs Net income Armstrong Co. Contador Co. $503,000 $503,000 248,000 45,000 255,000 458.000 155,000 358,000 $100,000 $100,000 (a1) Compute the degree of operating leverage for each company. (Round answers to 2 decimal places, e.g. 1.15.) Degree of Operating Leverage Armstrong Contador (b) Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each company. Armstrong Company...
Sales Variable costs Contribution margin Fixed costs Net income $525000 315000 210000 199500 $10500 $525000 262500 262500 252000 $10500 Compute the degree of operating leverage for each company. (Round ans Degree of Operating Leverage Swifty Company Marigold Company
eBook Calculator Margin of Safety and Operating Leverage Medina Company produces a single product. The projected income statement for the coming year is as follows: Sales (60,000 units @ $21.00) $1,260,000 Total variable cost 478,800 Contribution margin $ 781,200 Total fixed cost 755,160 Operating income $ 26,040 Required: 1. Compute the break-even sales dollars. 2. Compute the margin of safety in sales dollars 3. Compute the degree of operating leverage! 4. Compute the new operating income if sales are 20%...
Hudson Co. reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (9,800 units at $289 each) Variable costs (9,800 units at $210 each) Contribution margin Fixed costs E Pretax income $2,520,000 1,890,000 $ 630,000 420,000 $ 210,000 1. Compute the company's degree of operating leverage for 2019. 2. If sales decrease by 6% in 2020, what will be the company's pretax income? 3. Assume sales for 2020 decrease...
1.What is the contribution margin per unit?
2.What is the contribution margin ratio?
3.What is the variable expense ratio?
4.If sales increase to 1,001 units, what would be the increase
in net operating income?
5.If sales decline to 900 units, what would be the net
operating income?
6.If the selling price increases by $2.50 per unit and the
sales volume decreases by 100 units, what would be the net
operating income?
7.If the variable cost per unit increases by $1.50,...
Company A is a manufacturer with sales of $4,000,000 and a 60% contribution margin. Its fixed costs equal $1,800,000. Company B is a consulting firm with service revenues of $3,900,000 and a 25% contribution margin. Its fixed costs equal $400,000. Compute the degree of operating leverage (DOL) for each company. Which company benefits more from a 20% increase in sales Complete this question by entering your answers in the tabs below. Company Benefits DOL Compute the degree of operating leverage...
Questions: 1. What is the meaning of contribution margin ration? How is this ratio useful in planning business operations? 2. In all respects, Company A and Company B are identical except that Company A's costs are mostly variable whereas Company B's costs are mostly fixed. When sales increase, which company will tend to realize the greatest increase in profits? Explain. 3. What is the meaning of operating leverage? 4. What is the meaning of break-even point? Problem: Oslo Company prepared...
Questions: 1. What is the meaning of contribution margin ration? How is this ratio useful in planning business operations? 2. In all respects, Company A and Company B are identical except that Company A's costs are mostly variable whereas Company B's costs are mostly fixed. When sales increase, which company will tend to realize the greatest increase in profits? Explain. 3. What is the meaning of operating leverage? 4. What is the meaning of break-even point? Problem: Oslo Company prepared...
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