Directions Below is information for Blue Company. Using this information, answer the following questions on the "Calculation" tab in the file. Show your work (how you got your answer) and format appropriately. Blue company has prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 to 1,500 units): Sales $ 20,000 Variable expenses 12,000 Contribution margin 8,000 NOTE: Use the amounts in the original fact pattern to the left as your basis for the questions below. Fixed expenses 6,000 Net operating income $ 2,000 Questions: 1. What is the contribution margin per unit? 2. What is the contribution margin ratio? 3. What is the variable expense ratio? 4. If sales increase to 1,001 units, what would be the increase in net operating income? 5. If sales decline to 900 units, what would be the net operating income? 6. If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income? 7. If the variable cost per unit increases by $1, spending on advertising increases by $1,500, and unit sales incrase by 250 units, what would be the net operating income? 8. What is the break-even point in unit sales? 9. What is the break-even point in dollar sales? 10. How many units must be sold to achieve a target profit of $5,000? 11. What is the margin of safety in dollars? 12. What is the degree of operating leverage? 1. The contribution margin per unit is calculated as follows: 8. The Break-Even point in unit

Directions Below is information for Blue Company. Using this information, answer the following questions on the "Calculation" tab in the file. Show your work (how you got your answer) and format appropriately. Blue company has prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 to 1,500 units): Sales $ 20,000 Variable expenses 12,000 Contribution margin 8,000 NOTE: Use the amounts in the original fact pattern to the left as your basis for the questions below. Fixed expenses 6,000 Net operating income $ 2,000 Questions: 1. What is the contribution margin per unit? 2. What is the contribution margin ratio? 3. What is the variable expense ratio? 4. If sales increase to 1,001 units, what would be the increase in net operating income? 5. If sales decline to 900 units, what would be the net operating income? 6. If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income? 7. If the variable cost per unit increases by $1, spending on advertising increases by $1,500, and unit sales incrase by 250 units, what would be the net operating income? 8. What is the break-even point in unit sales? 9. What is the break-even point in dollar sales? 10. How many units must be sold to achieve a target profit of $5,000? 11. What is the margin of safety in dollars? 12. What is the degree of operating leverage? 1. The contribution margin per unit is calculated as follows: 8. The Break-Even point in unit

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 1PA: A company sells small motors as a component part to automobiles. The Model 101 motor sells for $850...

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Directions

Below is information for Blue Company. Using this information, answer the following questions on the "Calculation" tab in the file. Show your work (how you got your answer) and format appropriately.

Blue company has prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 to 1,500 units):

Sales

$ 20,000

Variable expenses

12,000

Contribution margin

8,000

NOTE: Use the amounts in the original fact pattern to the left as your basis for the questions below.

Fixed expenses

6,000

Net operating income

$ 2,000

Questions:

1. What is the contribution margin per unit?

2. What is the contribution margin ratio?

3. What is the variable expense ratio?

4. If sales increase to 1,001 units, what would be the increase in net operating income?

5. If sales decline to 900 units, what would be the net operating income?

6. If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income?

7. If the variable cost per unit increases by $1, spending on advertising increases by $1,500, and unit sales incrase by 250 units, what would be the net operating income?

8. What is the break-even point in unit sales?

9. What is the break-even point in dollar sales?

10. How many units must be sold to achieve a target profit of $5,000?

11. What is the margin of safety in dollars?

12. What is the degree of operating leverage?

1. The contribution margin per unit is calculated as follows:

8. The Break-Even point in unit sales is calculated as follows:

2. The contribution margin ratio is calculated as follows:

9. The Break-Even point in dollar sales is calculated as follows:

3. The variable expense ratio is calculated as follows:

10. The number of units to achieve the target profit is calculated as follows:

4. The increase in net operating income is calculated as follows:

11. The margin of safety in dollars is calculated as follows:

5. If sales decline to 900 units, the net perating income would be computed as follows:

12. The degree of operating leverage is calculated as follows:

6. The new net operating income would be computed as follows:

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