AutoSave 5 VC ... FA 24 CVP Workbook - Saved Q Search (Cmd + Ctrl + U) Home Insert Draw Page Layout Formulas Data Review View Automate Comments Share fx Define Name v Ev Trace Precedents Calculate Now Use in Formula v Trace Dependents Insert AutoSum Recently Financial Logical Text Date & Lookup & Math & More Name Show Error Watch Calculation Calculate Sheet Function Used Time Reference Trig Functions Manager Bi Create from Selection Remove Arrows v Formulas Checking Window Options A1 X fx Instructions: Below is a partial template. You will need to add the appropriate lines, with descriptions, D G M N 0 P Q R S T U V W X Y Z AA Instructions: Below is a partial template. You will need to add the appropriate lines, with descriptions. and numbers to show your detailed calculations for the requirements. Please refer to the Refresh and Voost worksheets for formatting examples. ROCKET AUTOMOTIVE Compensation Package Review R1: Determine the degree of operating leverage Parker Strong 19 Operating Income IS Degree of Operating Leverage R3: Calculate the percentage and dollar amount increase in income if sales increase by 30%. Parker Strong 4 Percentage Increase in Operating Income 7 Dollar Increase in Operating Income R3: Calculate the percentage and dollar amount decrease in income if sales decrease by 30%. Parker Strong Percentage Decrease in Operating Income 49 50 Dollar Decrease in Operating Income CVP Analysis - Voost What If Analysis -Voost DOL - Rocket Auto + Ready Accessibility: Investigate + 75%AutoSave 5 VC ... FA 24 CVP Workbook - Saved Q Search (Cmd + Ctri + U) Home Insert Draw Page Layout Formulas Data Review View Automate Comments Share fx e Define Name v Ev Trace Precedents Calculate Now Use in Formula Trace Dependents Insert AutoSum Recently Financial Logical Text Date & Lookup & Math & More Name Show Error Watch Calculation Calculate Sheet Function Used Time Reference Trig Functions Manager Bi Create from Selection Remove Arrows v Formulas Checking Window Options A1 X fx Instructions: Below is a partial template. You will need to add the appropriate lines, with descriptions, C D G M N 0 P Q R S T U V W X Y Z AA Percentage Increase in Operating Income Dollar Increase in Operating Income 40 R3: Calculate the percentage and dollar amount decrease in income if sales decrease by 30%. Parker Strong 47 Percentage Decrease in Operating Income 0 Dollar Decrease in Operating Income R4: Prepare the contribution margin income statement Parker Strong 9 8 8 8 8 8 2 8 8 $4 Operating income S CVP Analysis - Voost What If Analysis -Voost DOL - Rocket Auto + Ready Accessibility: Investigate + 75%Managerial Accounting FA 24 CVP Analysis Exercise Instructions Operating Leverage Jonathan Allen is the owner of a Rocket Automotive. Rocket Automotive sells refurbished auto parts to used car dealerships. He wants to determine a competitive compensation package for his sales team. He is trying to decide between a commission-based versus a salary-based compensation package, or something in between. To help him evaluate the financial impact of each compensation structure on his company he gathers basic financial information from two companies with similar year-end performance but different compensation plans. Parker Motors uses a commission-based approach, where its sales staff operates exclusively on commission. Strong Automotive Group, on the other hand, pays its sales staff a flat salary with no commission. Note the following information collected for each company. Parker Strong Current sales volume 15,000 units 15,000 units Average Selling price per unit $430 $430 Average Variable cost per unit $300 $210 Total Fixed costs $650,000 $1,300,000 Requlred Create a worksheet in the CVP workbook to complete the tasks stated below. Present a contribution margin income statement for each company at its current volume of sales, and calculate the degree of operating leverage (DOL) for each. 2. Utilizing the DOL from part (1), calculate the percentage and dollar amount by which income will increase for each company if they both increase their sales by 30%. 3. Utilizing the DOL from part (1), calculate the percentage and dollar amount by which income will decrease for each company if they both decrease their sales by 30%. 4. Jonathan has used the DOL to make his projections in parts (2) and (3). His board, however, is not as familiar with the concept; they want to see full income statements to believe that income really would increase (or decrease) by these amounts due to a change in volume. Help Jonathan present his analysis more clearly to the board by preparing contribution margin income statements for both companies, under both the volume increase and decrease scenarios in parts (2) and (3)