Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows: Sales $ 1,920,000 Variable expenses Contribution margin Fixed expenses 960,000 960,000 160,000 Net operating income $ 800,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. Assume this year's unit sales and total sales increase by 52,000 units and $4,160,000, respectively. If the fixed expenses do not change, how much will net operating income increase? 4-a. What is the degree of operating leverage based on last year's sales? 4-b. Assume the president expects this year's unit sales to increase by 20%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced that a 12% reduction in the selling price, combined with a $70,000 increase in advertising, would increase this year's unit sales by 25%. a If the sales manager is right, what would be this year's net operating income if his ideas are implemented? b. If the sales nager's ideas are implemented, how much Inet operating income increase or decrease over last year? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.40 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's unit sales by 25%. How much could the president increase this year's advertising expense and still earn the same $800,000 net operating income as last year? Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows: Sales $ 1,920,000 Variable expenses Contribution margin Fixed expenses 960,000 960,000 160,000 Net operating income $ 800,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. Assume this year's unit sales and total sales increase by 52,000 units and $4,160,000, respectively. If the fixed expenses do not change, how much will net operating income increase? 4-a. What is the degree of operating leverage based on last year's sales? 4-b. Assume the president expects this year's unit sales to increase by 20%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced that a 12% reduction in the selling price, combined with a $70,000 increase in advertising, would increase this year's unit sales by 25%. a If the sales manager is right, what would be this year's net operating income if his ideas are implemented? b. If the sales nager's ideas are implemented, how much Inet operating income increase or decrease over last year? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.40 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's unit sales by 25%. How much could the president increase this year's advertising expense and still earn the same $800,000 net operating income as last year?
Expert Answer:
Answer rating: 100% (QA)
Answer for 1 Sales 1920000 Variable expenses 960000 Contribution margin 960000 Sales Variable expens... View the full answer
Related Book For
Managerial Accounting
ISBN: 9781260247787
17th Edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
Students also viewed these accounting questions
-
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable expenses are $8 per unit, and fixed expenses total $180,000 per year. Its operating results...
-
Sales price $80.00 Per unit variable expenses Purchase cost 43.50 Sales commissions 11.50 Total per unit variable costs $55.00 Total annual fixed expenses Advertising $98,500 Rent 146,500 Salaries...
-
Express the following sum in closed form. 2 k 2 (4 + 3 - 4 ) = n k 1
-
Price discrimination sounds like a socially bad thing. Can you think of any reasons why price discrimination could be viewed as a socially good thing?
-
For each of the following variables, identify whether you could use a pie chart, bar chart, histogram, or frequency polygon to visually display the data: a. Shoe size b. College major c. Favorite...
-
A mixing basin in a sewage filtration plant is stirred by a mechanical agitator with a power input \(\dot{W} \doteq F \cdot L / T\). Other parameters describing the performance of the mixing process...
-
Refer to the data in Exercise 6-31. The president of Tiger Furnishings is confused about the differences in costs that result from using direct labor costs and machine-hours. Required a. Explain why...
-
The Tuck Corporation pays annual dividends of P6.00 on the cumulative preferred stock. What is the current value of this stock if an investor requires a 10 percent annual rate of return?
-
Use the following payoff table for Hardaway Corporation and Paxton Industries. These two firms must make simultaneous pricing decisions. They can choose low, medium, or high prices. The payoffs given...
-
Discuss and critically analyse the notion of 'shareholder primacy' as implied by the SWM model and as criticised by those who argue that it is partially responsible for some of the world's...
-
Return to Figure 9.2. Suppose P 0 is $10 and P 1 is $11. Suppose a new firm with the same LRAC curve as the incumbent tries to break into the market by selling 4,000 units of output. Estimate from...
-
What is a margin requirement?
-
What are two ratios that measure market value for publicly traded investor-owned businesses?
-
What are the differences between shares that Tenet Healthcare sells in the primary market and its shares being sold in the secondary market?
-
Why is it useful?
-
Find 02 and 04 corresponding to a dead-center posture. Is there a toggle posture? 2 1 3 B 180 Q4 4 1 x
-
Suppose the concentration of glucose inside a cell is 0.1 mm and the cell is suspended in a glucose solution of 0.01 mm. a. What would be the free energy change involved in transporting 10-o mole of...
-
If the actual level of activity is greater than the planned level of activity, would you expect the activity variances for variable expenses to be favorable, unfavorable, or a combination of the two?
-
What is job-order costing?
-
What is meant by the term discounting?
-
A \(20 \mathrm{~kg}\) block is connected to a spring of stiffness \(1 \times 10^{5} \mathrm{~N} / \mathrm{m}\) and placed on a surface which makes an angle of \(30^{\circ}\) with the horizontal. A...
-
A motorcycle travels over a road whose contour is approximately sinusoidal, \(y(z)=0.2 \sin (0.4 z) \mathrm{m}\) where \(z\) is measured in meters. Using a SDOF model, design a suspension system with...
-
A suspension system is being designed for a \(1000 \mathrm{~kg}\) vehicle. A first model of the system used in the design process is a spring of stiffness \(k\) in parallel with a viscous damper of...
Study smarter with the SolutionInn App