Answered: 1 Chapter 5: Applying Excel B Data 4…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A1
fx
Chapter 5: Applying Excel
A
В
1 Chapter 5: Applying Excel
2
3 Data
20,000 units
$60 per unit
$45 per unit
$270,000
4 Unit sales
5 Selling price per unit
6 Variable expenses per unit
7 Fixed expenses
8
9 Enter a formula into each of the cells marked with a ? below
10 Review Problem: CVP Relationships
11
12 Compute the CM ratio and variable expense ratio
13 Selling price per unit
14 Variable expenses per unit
15 Contribution margin per unit
$60 per unit
45 per unit
$15 per unit
16
17 CM ratio
25%
18 Variable expense ratio
75%
19
20 Compute the break-even
18,000 units
$1,080,000
21 Break-even in unit sales
22 Break-even in dollar sales
23
24 Compute the margin of safety
25 Margin of safety in dollars
26 Margin of safety percentage
120,000
10%
27
28 Compute the degree of operating leverage
$ 1,200,000
900,000
300,000
$270,000
$
29 Sales
30 Variable expenses
31 Contribution margin
32 Fixed expenses
33 Net operating income
30,000
34
35 Degree of operating leverage
10.00
36
%24

Transcribed Image Text:4. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20% so that the Data area looks like this: A B 1 Chapter 5: Applying Excel 2 3 Data 4. Unit sales 72.000 units Selling price per unit 10 per unit 6 Variable expenses per unit 6 per unit Fixed expenses $ 216,000 7 (a) What is net operating income? (Negative amount should be indicated by a minus sign.) Net operating income (loss) (b) By what percentage did the net operating income increase? Percentage increase in net operating income 5. Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930s. The retro-look cycle would be sold for $18,000 and at that price, Thad estimates 700 units would be sold each year. The variable cost to produce and sell the cycles would be $13,500 per unit. The annual fixed cost would be $2,362,500. a. What is the break-even in unit sales? Break-even in unit sales b. What is the margin of safety in dollars? Margin of safety in dollars c. What is the degree of operating leverage? (Round your answer to 2 decimal places.) Degree of operating leverage Thad is worried about the selling price. Rumors are circulating that other retro brands of cycles may be revived. If so, the selling price for the Western Hombre would have to be reduced to $17,000 to compete effectively. In that event, Thad would also reduce fixed expenses to $1,937,500 by reducing advertising expenses, but he still hopes to sell 700 units per year. d. What would the net operating income be in this situation? (Negative amount should be indicated by a minus sign.) Net operating income (loss)

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