Question

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   $   21,800
Variable expenses      12,600
Contribution margin      9,200
Fixed expenses      7,452
Net operating income   $   1,748

1. What is the contribution margin per unit? (Round your answer to 2 decimal places.)

2. What is the contribution margin ratio? (Enter your answer as a percentage rounded to 2 decimal places (i.e., 0.13579 should be entered as 13.58).)

  

3. What is the variable expense ratio? (Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).

4. If sales increase to 1,001 units, what would be the increase in net operating income? (Round your answer to 2 decimal places.)

5. If sales decline to 900 units, what would be the net operating income? (Do not round intermediate calculations.)

6. If the selling price increases by $1.90 per unit and the sales volume decreases by 100 units, what would be the net operating income (Do not round intermediate calculations.)

7. If the variable cost per unit increases by $.90, spending on advertising increases by $1,400, and unit sales increase by 250 units, what would be the net operating income? (Do not round intermediate calculations.)

8. What is the break-even point in unit sales? (Do not round intermediate calculations.)

9. What is the break-even point in dollar sales? (Round intermediate calculations to 4 decimal places. Round your answer to the nearest dollar amount.)

10. How many units must be sold to achieve a target profit of $5,474? (Do not round intermediate calculations.)

  

11-a. What is the margin of safety in dollars? (Do not round intermediate calculations.)

11-b. What is the margin of safety percentage? (Round your final answers to the nearest whole percentage (i.e, .12 should be entered as 12).)

12. What is the degree of operating leverage? (Round your answer to 2 decimal places.)

13. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in sales? (Do not round intermediate calculations. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).

14. 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 $7,452 and the total fixed expenses are $12,600. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage? (Round your answer to 2 decimal places.)

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 $7,452 and the total fixed expenses are $12,600. 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? (Do not round intermediate calculations. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).

Answer 1