Problem:

Oslo Compnay prepared the following contribution income statement based on a sales volume of 1,00 units (the relevant rango 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:

Question 1: What is the contribution margin per unit?

Question 2: What is the contribution margin ratio?

Question 3: What is the variable expense ratio?

Question 4: If the sales increase to 1,001 units, what would be in te increase in net operating income?

Question 5: If sales decline to 900 units, what would be the the net operating income?

Question 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?

Question 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?

Question 8: What is the break-even point in unit sales?

Question 9: What is the break-even point in sales dollars?

Question 10: How many units must be sold to acheive a target profit of $5,000.

Question 11: What is the margin of safety in dollars? What is the margin of safety performance?

Question 12: What is the degree of operating leverage?

Question 13: Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in sales?

Question 14: Assume that the amounts of the comapny's total variable expenses and the total fixed expenses were reversed. Assume that the total variable expenses are $6,000 and the total fixed expenses are $12,000. What is the degree of operating leverage?

Question 15: Using the degree of operating leverage that you compared in the previous question, what is the estimated percent increase in net operating income of a 5% increase in sales?

Note: Explain all calculation and formulas.