2 3 Data 4 Unit sales 20,000 units 5 Selling price per unit $60 per unit 6 Variable expenses per unit $45 per unit 7 Fixed expenses $240,000 8 9 Enter a formula into each of the cells marked with a ? below 10 Review Problem: CVP Relationships 11 12 Compute the CM ratio and variable expense ratio 13 Selling price per unit ? per unit 14 Variable expenses per unit 2 per unit 15 Contribution margin per unit 2 per unit 16 17 CM ratio 18 Variable expense ratio ? 19 20 Compute the break-even 21 Break-even in unit sales ? units 22 Break-even in dollar sales 23 24 Compute the margin of safety 25 Margin of safety in dollars ? 26 Margin of safety percentage ? 27 28 Compute the degree of operating leverage 29 Sales ? 30 Variable expenses ? 31 Contribution margin ? 32 Fixed expenses 33 Net operating income 34 35 Degree of operating leverage ??? 2 ? ? 2 2. Change all of the numbers in the data area of your worksheet so that it looks like this: B C 1 Chapter 5: Applying Excel 2 3 Data 4 Unit sales S Selling price per unit 6 Variable expenses per unit 7 Fixed expenses $ 40,000 units $ 40 per un $ 28 per unit $ 432,000 If your formulas are correct, you should get the correct answers to the following questions. (a) What is the break even in dollar sales? Break even in collar sales Required information (b) What is the margin of safety percentage? Margin of safety percentage % (c) What is the degree of operating leverage? (Round your answer to 2 decimal places.) Degree of operating leverage 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% Percentage increase in net operating income 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: B 1 Chapter 5: Applying Excel 2 48,000 units 3 Data 4 Unit sales 5 Selling price per unit 6 Variable expenses per unit 7 Foxed expenses 40 per un $ $ 28 per unit $ 432,000 (a) What is net operating income? (Negative amount should be indicated by a minus sign.) Net operating incomo lass) (b) By what percentage did the net operating income increase? Part 2 of 2 Porcentage increase in net operating incomo % 1 points Bloom forces 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 $14,000 and at that price, Thad estimates 500 units would be sold each year. The variable cost to produce and sell the cycles would be $11.200 per unit. The annual fixed cost would be $1,050,000 a. What is the break-even in unt sales? Break even in unt 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.) Degree of operating leverage 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 $12,100 to compete effectively. In the event, Thad would also reduce fixed expenses to $872,000 by reducing advertising expenses, but he still hopes to sell 500 units per year. d. What would the net operating Income be in this situation? (Negative amount should be indicated by a minus sign) Not operating incomes)