Vice President for Sales and Marketing Sam Totter is trying to
plan for the coming year in terms of production needs to meet the
sales demand. He is also trying to determine ways in which the
company’s profits might be increased in the coming year.
Instructions :
Northern Illinois Manufacturing markets a simple water control
and timer that it mass-produces. During last year, the company sold
701,000 units at an average selling price of 4.20 per unit. The
variable expenses were $1,857,650 and the fixed expenses were
$646,450.
- What is the product’s contribution margin ratio? (Round to
nearest whole percentage.)
- What is the company’s break-even point in units and in dollars
for this product?
- What is the margin of safety, both in dollars and as a ratio?
What is the company’s degree of operating leverage? (Round to
nearest whole percentage.)
- If management wanted to increase its net operating income from
this product by 10%, how many additional units would have to be
sold to reach this income level?
- If sales increase by 51,000 units and the cost behaviors do not
change, how much will net operating income increase on this
product?
- Northern Illinois’ management believes that increased
advertising would increase unit sales by 10%. If management wants
to increase its operating income by $50,000, how much could the
company spend on additional advertising to reach its goal?
- Using last year’s data as the starting point, assume the
company can increase sales by 5% by just continuing its current
marketing program. What would the company’s net operating income by
next year using the DOL?
Please complete in Microsoft excel.