BGB Tuna Processing manufactures and sells canned tuna to restaurants. Variable cost per can amounts to $6 and the selling price of each can is $25. Total annual fixed costs amount to $14,630,000. Sales are estimated to amount to 1,470,000 cans of tuna. 

a) Calculate the following values.

Gross Sales: $

Total Variable Costs: $

Contribution Margin: $

Operating Profit: $

b) If the company sells according to their estimates, what is the degree of operating leverage? The break-even point (in units)?

c) If the company increases the sales volume (cans) by 32%, by what percentage will operating profit increase? By what dollar amount will operating income increase? Use the degree of operating leverage.

d) If the company spends $28,000 as additional advertising expense (fixed cost), sales volume will increase by 13%. Determine the new operating leverage and the new break-even point in units. 

Answer rating: 100% (QA)

a Gross Sales 25 x 1470000 36750000 Total Variable Costs 6 x 1470000 8820000 Contribution Margin 367... View the full answer