Question
In: Accounting
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows:
5. The sales manager is convinced that a 10% reduction in the selling price, combined with a $79,000 increase in advertising, would increase this year's unit sales by 25%.
a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented?
b. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year?
6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.20 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $300,000 net operating income as last year?
| Sales | $ | 1,000,000 |
| Variable expenses | 500,000 | |
| Contribution margin | 500,000 | |
| Fixed expenses | 200,000 | |
| Net operating income | $ | 300,000 |
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows:
Sales
$
1,040,000
Variable expenses
520,000
Contribution margin
520,000
Fixed expenses
180,000
Net operating income
$
340,000
The sales manager is convinced that a 11% reduction in the
selling price, combined with a $74,000 increase in advertising,
would increase this year's unit sales by...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $200,000 per year. Its operating
results for last year were as follows:
Sales
$
1,000,000
Variable expenses
500,000
Contribution margin
500,000
Fixed expenses
200,000
Net operating income
$
300,000
Required:
Answer each question independently based on the original
data:
1. What is the product's CM ratio?
2. Use the CM ratio to determine the break-even point...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $160,000 per year. Its operating
results for last year were as follows
Sales
$
1,000,000
Variable expenses
500,000
Contribution margin
500,000
Fixed expenses
160,000
Net operating income
$
340,000
Required:
Answer each question independently based on the original
data:
5. The sales manager is convinced that a 10% reduction in the
selling price, combined with a...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows:
Sales $ 1,120,000
Variable expenses 560,000
Contribution margin 560,000
Fixed expenses 180,000
Net operating income $ 380,000
Required:
Answer each question independently based on the original
data:
1. What is the product's CM ratio?
2. Use the CM ratio to determine...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows:
Sales $ 1,040,000
Variable expenses 520,000
Contribution margin 520,000
Fixed expenses 180,000
Net operating income $ 340,000
Required: Answer each question independently based on the
original data:
1. What is the product's CM ratio?
2. Use the CM ratio to determine the break-even point...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows: Sales $ 1,000,000 Variable
expenses 500,000 Contribution margin 500,000 Fixed expenses 180,000
Net operating income $ 320,000 Required: Answer each question
independently based on the original data: 5. The sales manager is
convinced that a 14% reduction in the selling price, combined with
a...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $180,000 per year.
Required:
Answer the following independent questions:
1.What is the product's CM ratio?
2. Use the CM ratio to determine the break-even point in dollar
sales.
3. Due to an increase in demand, the company estimates that
sales will increase by $51,000 during the next year. By how much
should net...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows:
Sales
$
960,000
Variable expenses
480,000
Contribution margin
480,000
Fixed expenses
180,000
Net operating income
$
300,000
Required:
Answer each question independently based on the original
data:
1. What is the product's CM ratio?
2. Use the CM ratio to determine the break-even point...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $160,000 per year.
Required:
Answer the following
independent questions:
1.
What is the product's CM ratio?
2.
Use the CM ratio to determine the break-even point in dollar
sales.
3.
Due to an increase in demand, the company estimates that sales
will increase by $54,000 during the next year. By how much...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden
birdhouse that sells for $40 per unit. Variable expenses are $20.00
per unit, and fixed expenses total $180,000 per year. Its operating
results for last year were as follows:
Sales
$
1,000,000
Variable expenses
500,000
Contribution margin
500,000
Fixed expenses
180,000
Net operating income
$
320,000
1) If this year's sales increase by $52,000 and fixed expenses
do not change, how much will net operating income increase?
2) a. What is the degree...
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