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):
|
|
|
| Sales |
$ |
20,000 |
| Variable expenses |
|
12,000 |
|
|
|
| Contribution margin |
|
8,000 |
| Fixed expenses |
|
6,000 |
|
|
|
| Net operating income |
$ |
2,000 |
|
|
|
|
Required:
6- If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income?
Net operating income $
7- If the variable cost per unit increases by $1, spending on advertising increases by $1,500, and unit sales increase by 250 units, what would be the net operating income?
Net operating income $
8- What is the break-even point in unit sales?
Break-even point units
9- What is the break-even point in sales dollars?
Break-even point $
10- How many units must be sold to achieve a target profit of $5,000?
Number of units
13- Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in sales?
Percent increase in net operating income %
15- Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $6,000 and the total fixed expenses are $12,000. Given this scenario, and assuming that total sales remain the same, calculate the degree of operating leverage. Using the calculated degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in sales?
Percent increase in net operating income %