Homework Answers
1. Degree of operating leverage
1st company
Degree of operating leverage = contribution margin / operating income
= 100,000 / 50,000
= 2 times
2nd company
Degree of operating leverage = contribution margin / operating income
= 300,000 / 50,000
= 6 times
2. Break even point in dollar
1st company
Break even point in dollar = fixed cost / contribution margin ratio
= 50,000 / 20%
= $250,000
2nd company
Break even point in dollar = fixed cost / contribution margin ratio
= 250,000 / 60%
= $416,667
2nd company has higher break even point
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Noir Company
Sales
$500,000
$500,000
Variable costs
280,000
180,000
Contribution margin
220,000
320,000
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Noir Company
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Noir Company
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Noir Company
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Discuss how changes in sales volumes impacts the profits of each
company.
Discuss how the cost structure of these two companies affects
their operating leverage and profitability.
The following CVP income statements are available for Blanc Company and Noir Company Blanc Company Sales Variable costs Contribution margin Fixed costs Net Income $500,000 280,000 220,000 170,000 $50,000 Noir Company $500,000 180,000 320,000 270,000 $50,000 Contribution Margin Ratio Blanc Company Noir Company 0.64 Blanc Company Noir Company Break-even Point S386,364 $421,875 Margin...
Complete Problem 4-34, and provide the required information.
Required:
1 - The sales revenue that must be earned for
Carlyle to break even is ____ dollars
2 - HINT: first use your understanding of the %
of desk lamps and the % of floor lamps to determine the sales mix.
Once you have this information you can use this to calculate the
basket contribution margin.
The basket contribution margin is ___ dollars
The number of floor lamps that must be...
Chapter 6 Assignment i Saved Lobster Trap Company is considering automating its manufacturing facility. Company information before and after the proposed automation follows: 10 points Before Automation Sales revenue $191,000 Less: Variable 108,000 cost Contribution margin $ 83,000 Less: Fixed cost 11,000 Net operating income_ $ 72,000 After Automation $191,000 41,000 eBook $150,000 57,000 $ 93,000 Print Required: 1. Calculate Lobster Trap's break-even sales dollars before and after automation. 2. Compute Lobster Trap's degree of operating leverage before and after...
The following CVP income statements are available for Blanc
Company and Noir Company.
Blanc Company
Noir Company
Sales
$500,000
$500,000
Variable costs
280,000
180,000
Contribution margin
220,000
320,000
Fixed costs
170,000
270,000
Net income
$50,000
$50,000
Contribution Margin Ratio
Blanc Company
0.44
Noir Company
0.64
Break-even Point
Blanc Company
$386,364
Noir Company
$421,875
Margin of Safety Ratio
Blanc Company
0.227
Noir Company
0.156
Degree of Operating Leverage
Blanc Company
4.4
Noir Company
6.4
CVP income statement assuming that sales revenue...
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