Question

The table below provides information about the product Microsoft Game.

Microsoft Game

Sale price per piece (kr / pc) 150.00

Variable cost per piece:

Direct material (kr / pc) 27.00

Direct wages (kr / pcs) 7.50

Indirect cost (ISK / pc) 7.50

Sales and management costs (kr / pc) 3.00

Fixed costs per year:

Indirect cost 600,000

Sales and management costs 135,000

1. Calculate contribution margin per unit

2. Set up a statement of income in the form of a contribution income statement, etc. plan for the sale of 8,000 pieces of Microsoft Game product this year

3. Calculate profits from the sale of the product, etc. 10% increase in sales for the year (ie 10% increase in estimated volume)

4. Calculate the degree of operating leverage of the product

Answer 1

Answer 1.

Selling price per unit = 150.00

Variable cost per unit = Direct materials + Direct wages + Indirect cost + Sales and management costs
Variable cost per unit = 27.00 + 7.50 + 7.50 + 3.00
Variable cost per unit = 45.00

Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = 150.00 - 45.00
Contribution margin per unit = 105.00

Answer 2.

Fixed expenses = Indirect costs + Sales and management costs
Fixed expenses = 600,000 + 135,000
Fixed expenses = 735,000

Answer 3.

Units sold = 8,000 + 10% * 8,000
Units sold = 8,800

Answer 4.

% Change in net income = (New net income - Old net income) / Old net income
% Change in net income = (189,000 - 105,000) / 105,000
% Change in net income = 84,000 / 105,000
% Change in net income = 80%

Degree of operating leverage = % Change in net income / % Change in sales
Degree of operating leverage = 80% / 10%
Degree of operating leverage = 8.00