3. Pablo Escobar has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes...
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3. Pablo Escobar has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. Pablo has just received a degree in business and she is anxious to apply the principles she has learned to her business. In time, she hopes to open a chain of sandal shops. As a first step, she has prepared the following analysis for her new store: Sales price per pair of sandals. Variable expenses per pair of sandals. Contribution margin per pair of sandals. Fixed expenses per year: Building rental... Equipment depreciation. Selling. Administrative. Total fixed expenses. $40 16 $24 $15,000 7,000 20,000 18,000 $60,000 Refer to the original data. During the first year, the store sold only 3,000 pairs of sandals and reported the following operating results: Sales (3,000 pairs). Variable expenses. Contribution margin. Fixed expenses.. Net operating income. . $120,000 48,000 72,000 .60,000 $ 12,000 a) What is the store's degree of operating leverage? b) Pablo is confident that with a more intense sales effort and with a more creative advertising program she can increase sales by 50% next year. What would be the expected percentage increase in net operating income? Use the degree of operating leverage to compute your answer. 3. Pablo Escobar has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. Pablo has just received a degree in business and she is anxious to apply the principles she has learned to her business. In time, she hopes to open a chain of sandal shops. As a first step, she has prepared the following analysis for her new store: Sales price per pair of sandals. Variable expenses per pair of sandals. Contribution margin per pair of sandals. Fixed expenses per year: Building rental... Equipment depreciation. Selling. Administrative. Total fixed expenses. $40 16 $24 $15,000 7,000 20,000 18,000 $60,000 Refer to the original data. During the first year, the store sold only 3,000 pairs of sandals and reported the following operating results: Sales (3,000 pairs). Variable expenses. Contribution margin. Fixed expenses.. Net operating income. . $120,000 48,000 72,000 .60,000 $ 12,000 a) What is the store's degree of operating leverage? b) Pablo is confident that with a more intense sales effort and with a more creative advertising program she can increase sales by 50% next year. What would be the expected percentage increase in net operating income? Use the degree of operating leverage to compute your answer.
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1 Break even point in pairs of Sandals Fixed cost Contribution margin per un... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
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