Break$-$Even in Units, Target Income, New Unit Variable Cost, Degree of Operating Leverage, Percent Change in Operating Income

Reagan, Inc., has developed a chew$-$proof dog bed$$the Tuff$-$Pup. Fixed costs are $$204,400$ per year. The average price for the Tuff$-$Pup is $$36,$ and the average variable cost is $$22$ per unit. Currently, Reagan produces and sells $20,000$ Tuff$-$Pups annually.

Required:

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$1.$ How many Tuff$-$Pups must be sold to break even?

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$2.$ If Reagan wants to earn $$95,900$ in profit, how many Tuff$-$Pups must be sold?

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Prepare a variable$-$costing income statement to verify your answer.

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Reagan, Inc.

Variable$-$Costing Income Statement

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$3.$ Suppose that Reagan would like to lower the break$-$even units to $12,000.$ The company does not believe that the price or fixed cost can be changed. Calculate the new unit variable cost that would result in break$-$even units of $12,000.$ If required, round your intermediate computations and final answer to the nearest cent.

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$4.$ What is Reagan$$s current contribution margin and operating income?

Current contribution margin $fill in the blank $5$d$0$a$57$f$8$d$05$e$07$c$\_2$

Current operating income $fill in the blank $5$d$0$a$57$f$8$d$05$e$07$c$\_3$

Calculate the degree of operating leverage. Round your answer to three decimal places.

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If sales increased by $10$ percent next year, what would the percent change in operating income be$?$ Use your rounded answer to the question above in your computations, and round your final percentage answer to two decimal places $($for example, $45\mathrm{.}555\%$ would be entered as $"45\mathrm{.}56").$

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What would the new total operating income for next year be$?$ Round your answer to the nearest dollar.

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