Question
In: Accounting
2. Change all of the numbers in the data area of your worksheet so that it...
2. Change all of the numbers in the data area of your worksheet so that it looks like this:
|
If your formulas are correct, you should get the correct answers to the following questions.
(a) What is the break-even in dollar sales?
(b) What is the margin of safety percentage?
(c) What is the degree of operating leverage? (Round your answer to 2 decimal places.)
3. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%.
4. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20% so that the Data area looks like this:
|
(a) What is net operating income? (Negative amount should be indicated by a minus sign.)
(b) By what percentage did the net operating income increase?
5. Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930s. The retro-look cycle would be sold for $13,000 and at that price, Thad estimates 800 units would be sold each year. The variable cost to produce and sell the cycles would be $9,100 per unit. The annual fixed cost would be $2,808,000.
a. What is the break-even in unit sales?
b. What is the margin of safety in dollars?
c. What is the degree of operating leverage? (Round your answer to 2 decimal places.)
Thad is worried about the selling price. Rumors are circulating that other retro brands of cycles may be revived. If so, the selling price for the Western Hombre would have to be reduced to $11,500 to compete effectively. In that event, Thad would also reduce fixed expenses to $2,472,000 by reducing advertising expenses, but he still hopes to sell 800 units per year.
d. What would the net operating income be in this situation? (Negative amount should be indicated by a minus sign.)
Solutions
Expert Solution
| 2 | |||
| (a) | |||
| Calculation of Break even in dollar sale | |||
| Sales | 30000*30 | 900000 | |
| Less :- | |||
| Variable Cost | 30000*18 | 540000 | |
| Contribution | 360000 | ||
| Break Even | = | Fixed cost/ Contribution per unit | |
| 288000/360000 | |||
|
.80 |
|||
| (b) | |||
| Calculation of Margin of safety Percentage | |||
| Margin of safety | = | Total sales - Break even Sales | |
| Total sales | |||
| 900000-720000/900000 | |||
| 20 | |||
| c) | |||
| Calculation of operating leverage | |||
| Sales | 30000*30 | 900000 | |
| Less :- | |||
| Variable Cost | 30000*18 | 540000 | |
| Contribution | 360000 | ||
| Less :- | |||
| Fixed Cost | 288000 | ||
| Earning before Interest and Tax | 72000 | ||
| Degree of Operating leverage | Contribution | 360000 | |
| Earning before Interest and Tax | 72000 | ||
| 5 |
| 3 | |||
| If unit sales increase by 20% | |||
| No of units sold after 20% Increase | 36000 | ||
| Sales | 36000*30 | 1080000 | |
| Less :- | |||
| Variable Cost | 36000*18 | 648000 | |
| Contribution | 432000 | ||
| Degree of Operating leverage | Contribution/Earning before Interest and Tax | ||
| 5 | 432000/EBIT | ||
| EBIT | 432000/5 | ||
| EBIT | 86400 | ||
| Percentage Change in Net profit | 86400-72000 | ||
| 72000 | |||
| 14400 | |||
| 72000 | |||
| 20% |
| 4 | |||
| a) | |||
| Sales | 36000*30 | 1080000 | |
| Less :- | |||
| Variable Cost | 36000*18 | 648000 | |
| Contribution | 432000 | ||
| Less :- | |||
| Fixed Cost | 288000 | ||
| Earning before Interest and Tax(Net Operating Income) | 144000 |
| b) | |||
| Percentage Change in Net profit | 144000-86400 | ||
| 86400 | |||
| 57600 | |||
| 86400 | |||
| 66.67% |
| 5 | |||
| a) | |||
| Break Even Point in unit sales | Break Even | = | Fixed cost/ Contribution per unit |
| Contribution per unit | 13000-9100 | ||
| 3900 | |||
| 2808000/3900 | |||
| 721 Units |
| b) | |||
| Margin of Safety in Dollars | Total Sales - Break Even Point Sales | ||
| Break Even Point Sales | 721*13000 | 9373000 | |
| Total Sales | 800*13000 | 10400000 | |
| 10400000-9373000 | |||
|
1027000 |
| c) | |||
| Sales | 800*13000 | 10400000 | |
| Less :- | |||
| Variable Cost | 800*9100 | 7280000 | |
| Contribution | 3120000 | ||
| Less :- | |||
| Fixed Cost | 2808000 | ||
| Earning before Interest and Tax | 312000 | ||
| Degree of Operating leverage | Contribution | 3120000 | |
| Earning before Interest and Tax | 312000 | ||
| 10 |
| d) | |||
| Sales | 800*11500 | 9200000 | |
| Less :- | |||
| Variable Cost | 800*9100 | 7280000 | |
| Contribution | 1920000 | ||
| Less :- | |||
| Fixed Cost | 2472000 | ||
| Earning before Interest and Tax( Net Operating Income ) | -552000 |
ekkarill92 answered 1 year agoRelated Solutions
2. Change all of the numbers in the data area of your worksheet so that it...
2. Change all of the numbers in the data area of your worksheet
so that it looks like this:
A
B
C
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Chapter 4: Applying Excel
Data
Selling price per unit
$334
Manufacturing costs:
Variable per unit produced:
Direct materials
$135
Direct labor
$54
Variable manufacturing overhead
$26
Fixed manufacturing overhead per
year
$119,600
Selling and administrative
expenses:
Variable per unit sold...
2. Change all of the numbers in the data area of your worksheet so that it...
2. Change all of the numbers in the data area of your worksheet
so that it looks like this: If your formulas are correct, you
should get the correct answers to the following questions.
A
B
C
D
1
Chapter 5: Applying Excel
2
3
Data
4
Unit sales
80,000
units
5
Selling price per unit
$20
per unit
6
Variable expenses per unit
$14
per unit
7
Fixed expenses
$384,000
8
(a) What is the break-even in dollar sales?...
2. Change all of the numbers in the data area of your worksheet so that it...
2. Change all of the numbers in the data area of your worksheet
so that it looks like this:
A
B
C
D
1
Chapter 3: Applying Excel
2
3
Data
4
Unit sales
30,000
units
5
Selling price per unit
$50
per unit
6
Variable expenses per unit
$20
per unit
7
Fixed expenses
$720,000
8
If your formulas are correct, you should get the correct answers
to the following questions.
(a) What is the break-even in dollar sales?...
2. Change all of the numbers in the data area of your worksheet so that it...
2.
Change all of the numbers in the data area of your worksheet so
that it looks like this:
3
Data
4
Selling price per unit
$374
5
Manufacturing costs:
6
Variable per unit produced:
7
Direct materials
$152
8
Direct labor
$58
9
Variable manufacturing overhead
$38
10
Fixed manufacturing overhead per year
$166,400
11
Selling and administrative expenses:
12
Variable per unit sold
$4
13
Fixed per year
$98,000
14
15
Year 1
Year 2
16
Units in...
2. Change all of the numbers in the data area of your worksheet so that it...
2.
Change all of the numbers in the data area of your worksheet so
that it looks like this:
3
Data
4
Selling price per unit
$374
5
Manufacturing costs:
6
Variable per unit
produced:
7
Direct
materials
$152
8
Direct
labor
$58
9
Variable manufacturing overhead
$38
10
Fixed
manufacturing overhead per year
$166,400
11
Selling and administrative
expenses:
12
Variable per unit
sold
$4
13
Fixed per
year
$98,000
14
15
Year 1
Year 2
16
Units in...
1. Change all of the numbers in the data area of your worksheet so that it...
1. Change all of the numbers in the data area of your worksheet so
that it looks like this:
Data
Selling price per unit
$292
Manufacturing costs:
Variable per unit produced:
Direct materials
$125
Direct labor
$55
Variable manufacturing overhead
$23
Fixed manufacturing overhead per year
$172,800
Selling and administrative expenses:
Variable per unit sold
$7
Fixed per year
$74,000
Year 1
Year 2
Units in beginning inventory
0
Units produced during the year
3,200
2,700
Units sold during the...
The company is considering a project involving the purchase of new equipment. Change the data area of your worksheet to match the following
A
B
C
1
2
3
4
5
6
7
8
9
10
11
12
13
Chapter 7: Applying Excel
Data
Example E
Cost of equipment needed
$360,000
Working capital needed
$30,000
Overhaul of equipment in four years
$25,000
Salvage value of the equipment in five years
$30,000
Annual revenues and costs:
Sales revenues
$430,000
Cost of goods sold
$245,000
Out-of-pocket operating costs...
Check your worksheet by changing the variable selling cost in the Data area to $900, keeping all of the other data the same as in Exhibit 1–7.
This Excel worksheet form is to be used to recreate Exhibit 1–7. The workbook, and instructions on how to complete the file, can be found in Connect.
Required:
1. Check your worksheet by changing the variable selling cost in the Data area to $900, keeping all of the other data the same as in Exhibit 1–7. If your worksheet is operating properly, the net operating income under the traditional format income statement and under the contribution format income statement should...
Requirement 2: Revise the data in your worksheet to reflect the results for the subsequent period...
Requirement 2:
Revise the data in your worksheet to reflect the results for the
subsequent period as shown below:
A
B
C
D
E
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Chapter 9: Applying Excel
Data
Revenue
$16.50
q
Cost of ingredients
$6.25
q
Wages and salaries
$10,400
Utilities
$800
+
$0.20
q
Rent
$2,200
Miscellaneous
$600
+
$0.80
q
Actual results:
Revenue
$29,730
Cost of ingredients...
Here is the algorithm: 1. Assume that all numbers are prime from 2..n, so put them...
Here is the algorithm:
1. Assume that all numbers are prime from 2..n, so put them in
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list should be empty).
2. Make the first item be current.
3. Leave in the current item. Then, take out all of its
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factor).
4. Make current be the next element in primes.
5. If there are no...
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