Question

Required information The following information applies to the questions displayed below.) Part 2 of 15 Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): points Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 65,000 45,500 19,500 14,040 $ 5,460 Skloped 2. What is the contribution margin ratio? Contribution margin ratio %

Answer 1

2) Contribution margin ratio= Contribution margin*100/Sales

= $19500*100/65000= 30%

10) Contribution margin per unit= Total contribution margin/Number of units

= $19500/1000= $19.50 per unit

Units= (Fixed costs+Target profit)/Contribution margin per unit

= ($14040+11700)/19.50

= 1320 units

11) Break even sales= Fixed cost/Contribution margin ratio

= $14040/30%= $46800

Margin of safety in dollars= Actual sales-Break even sales

= $65000-46800= $18200

Margin of safety percentage= Margin of safety in dollars*100/Sales

= $18200*100/65000= 28%

15)

Sales	$65000
Variable expenses	14040
Contribution margin	50960
Fixed expenses	45500
Net operating income	$5460

Degree of operating leverage= Contribution margin/Net operating income

= $50960/5460= 9.33

Operating leverage= Percentage change in net operating income/Percentage change in sales

9.33= Percentage change in net operating income/5%

Percentage change in net operating income= 9.33*5%= 46.65%