Question
In: Accounting
Question No-1 Potato companies’ most recent income statement is shown below: Total Per Unit Sales (30,000...
Question No-1
Potato companies’ most recent income statement is shown below:
|
Total |
Per Unit |
|
|
Sales (30,000 units) |
$ 150,000 |
$5 |
|
(-) Variable Expenses |
90,000 |
3 |
|
Contribution Margin |
60,000 |
2 |
|
(-)Fixed expenses |
50,000 |
|
|
Net operating income |
10,000 |
Required:
- Compute the company’s degree of operating leverage.
- Using the degree of operating leverage, estimate the impact on net operating income of a 10%increase in sales.
- Verify your estimate from part (d) above by constructing a new contribution format income statement for the company assuming a 10% increase in sales.
- Determine the margin of safety in percentage.
- Prepare a new income statement considering that variable expenses will increase 20 cents per unit, the selling price will increase 12%, and the sales volume will be decreased by 10%. Will you suggest the change?
Solutions
Expert Solution
operating leverage of a company state the tendancy of operating income (EBIT) to change disproportionately with the change of sales. it also show the company's capacity to pay its variable and fixed cost expense within the revenue generated.
Net operating income will change with the change in sales.
in this above question i solve ques from alternative method
also.
ekkarill92 answered 1 year agoRelated Solutions
White Limited’s most recent income statement is shown below: Total Per Unit Sales (5,100 units) $...
White Limited’s most recent income statement is shown below:
Total
Per Unit
Sales (5,100 units)
$
163,200
$
32
Variable expenses
56,100
11
Contribution margin
107,100
$
21
Fixed expenses
91,350
Operating income
$
15,750
Required:
Prepare a new contribution format income statement under each of
the following conditions (consider each case independently):
1. The sales volume increases by 220 units.
2. The sales volume declines by 220 units.
3. The sales volume is 4,350 units.
White Limited’s most recent income statement is shown below: Total Per Unit Sales (6,000 units) $...
White Limited’s most recent income statement is shown below:
Total Per Unit
Sales (6,000 units) $ 312,000 $ 52.00
Variable expenses 216,000. 36.00
Contribution margin 96,000 $ 16.00
Fixed expenses. 84,000
Operating income $ 12,000
Fixed expenses 84,000
Operating income $ 12,000
Required: Prepare a new contribution format income statement under
each of the following conditions (consider each case
independently):
1. The sales volume increases by 200 units.
2. The sales volume declines by 200 units.
3. The sales volume...
Whirly Corporation’s most recent income statement is shown below: Total Per Unit Sales (7,200 units) $...
Whirly Corporation’s most recent income statement is shown
below:
Total
Per Unit
Sales (7,200 units)
$
237,600
$
33.00
Variable expenses
136,800
19.00
Contribution margin
100,800
$
14.00
Fixed expenses
55,400
Net operating income
$
45,400
Required:
Prepare a new contribution format income statement under each of
the following conditions (consider each case independently):
1.
The sales volume increases by 40 units.
2.
The sales volume decreases by 40 units.
3.
The sales volume is 6,200 units.
Miller Company’s most recent contribution format income statement is shown below: Total Per Unit Sales...
Miller Company’s most recent contribution format income
statement is shown below:
Total Per Unit
Sales (33,000 units) $330,000 $10.00
Variable expenses 231,000 7.00
Contribution margin 99,000 $3.00
Fixed expenses 40,000
Net operating income $ 59,000
Required: Prepare a new contribution format income statement
under each of the following conditions (consider each case
independently): (Do not round intermediate calculations. Round your
"Per unit" answers to 2 decimal places.)
1. The number of units sold increases by 16%.
2....
Miller Company’s most recent contribution format income statement is shown below: Total Per Unit Sales (31,000...
Miller Company’s most recent contribution format income
statement is shown below:
Total
Per Unit
Sales (31,000 units)
$217,000
$7.00
Variable expenses
124,000
4.00
Contribution margin
93,000
$3.00
Fixed expenses
48,000
Net operating income
$ 45,000
Required:
Prepare a new contribution format income statement under each of
the following conditions (consider each case independently):
(Do not round intermediate calculations. Round your "Per
unit" answers to 2 decimal places.)
1. The number of units sold increases by 10%.
2. The selling...
Miller Company’s most recent contribution format income statement is shown below: Total Per Unit Sales (32,000...
Miller Company’s most recent contribution format income
statement is shown below:
Total
Per Unit
Sales
(32,000 units)
$320,000
$10.00
Variable
expenses
224,000
7.00
Contribution
margin
96,000
$3.00
Fixed
expenses
43,000
Net operating
income
$
53,000
1. The number of units sold increases by 19%.
2. The selling price decreases by $1.20 per unit, and the number
of units sold increases by 21%.
3. The selling price increases by $1.20 per unit, fixed expenses
increase by $8,000, and the number of...
Kelly Company’s most recent contribution format income statement is shown below: Total Per Unit Sales (50,000...
Kelly Company’s most recent contribution format income statement
is shown below:
Total
Per Unit
Sales (50,000 units)
$
700,000
$
14
Variable costs
300,000
6
Contribution margin
400,000
$
8
Fixed costs
240,000
Operating income
$
160,000
Required:
Prepare a new contribution format income statement with a per
unit column under each of the following conditions (consider each
case independently):
The selling price increases by $1 per unit, fixed costs
increase by $20,000, and the number of units...
Whirly corporation most recent income statement is shown below: Total Per Unit Sales (7,600 units) 243,200...
Whirly corporation most recent income statement is shown
below:
Total Per Unit
Sales (7,600 units) 243,200 32.00
Variable Expenses 144,400 19.00
Contribution Margin 98,800
Fixed Expenses 55,300
Net Operating Income 43,500
Required:
Prepare a new contribution format income statement under each of
the following conditions (consider each case independently):
1. The sales volume increases by 60 units
2. The Sales Volume decreases by 60 units
3. The Sales Volume is 6,600
Miller Company’s contribution format income statement for the most recent month is shown below: Total Per...
Miller Company’s contribution format income statement for the
most recent month is shown below:
Total
Per Unit
Sales (44,000
units)
$
396,000
$
9.00
Variable expenses
264,000
6.00
Contribution margin
132,000
$
3.00
Fixed expenses
47,000
Net operating income
$
85,000
Required:
(Consider each case independently):
1. What is the revised net operating income if unit sales
increase by 13%?
2. What is the revised net operating income if the selling price
decreases by $1.20 per unit and the number...
Miller Company’s contribution format income statement for the most recent month is shown below: Total Per...
Miller Company’s contribution format income statement for the
most recent month is shown below:
Total
Per Unit
Sales (38,000 units)
$
342,000
$
9.00
Variable expenses
228,000
6.00
Contribution margin
114,000
$
3.00
Fixed expenses
47,000
Net operating income
$
67,000
Required:
(Consider each case independently):
1. What is the revised net operating income if unit sales
increase by 19%?
2. What is the revised net operating income if the selling price
decreases by $1.20 per unit and the number...
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