Splish Brothers's vice president of finance has offered another option. He suggests a different system that...
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Splish Brothers's vice president of finance has offered another option. He suggests a different system that combines personal service at key points in the cafeteria line with a less expensive automated self-service system for the other items. The financial information on this system is given below: Sales Variable costs Contribution margin Fixed costs Net Income Blended Service System $2,520,000 Operating leverage 1,638,000 $882,000 504,000 $378,000 (1) Determine the degree of operating leverage for this option. (Round answer to 2 decimal places, e.g. 15.25.) (2) How much would net income increase if sales increased by $252,000? (Round answer to 2 decimal places, e.g. 15.25%.) (3) Using the margin of safety ratio, how large of a decline in sales could this option sustain before operating at a loss. (Round margin of safety ratio to 2 decimal places, e.g. 0.25 and decline in sales to O decimal places, e.g. 125.) Margin of safety ratio Decline in sales % Splish Brothers's vice president of finance has offered another option. He suggests a different system that combines personal service at key points in the cafeteria line with a less expensive automated self-service system for the other items. The financial information on this system is given below: Sales Variable costs Contribution margin Fixed costs Net Income Blended Service System $2,520,000 Operating leverage 1,638,000 $882,000 504,000 $378,000 (1) Determine the degree of operating leverage for this option. (Round answer to 2 decimal places, e.g. 15.25.) (2) How much would net income increase if sales increased by $252,000? (Round answer to 2 decimal places, e.g. 15.25%.) (3) Using the margin of safety ratio, how large of a decline in sales could this option sustain before operating at a loss. (Round margin of safety ratio to 2 decimal places, e.g. 0.25 and decline in sales to O decimal places, e.g. 125.) Margin of safety ratio Decline in sales %
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SOLUTION 1 To determine the degree of operating leverage for this option we can use the following fo... View the full answer
Related Book For
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
Posted Date:
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