Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales $ 25,000 Variable expenses 17,500 Contribution margin 7,500 Fixed expenses 4,200 Net operating income $ 3,300 14. Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $4,200 and the total fixed expenses are $17,500. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage? (Round your answer to 2 decimal places.) 15. Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $4,200 and the total fixed expenses are $17,500. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in unit sales? (Round your intermediate calculations and final answer to 2 decimal places.)
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
| Sales | $ | 25,000 |
| Variable expenses | 17,500 | |
| Contribution margin | 7,500 | |
| Fixed expenses | 4,200 | |
| Net operating income | $ | 3,300 |
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14. Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $4,200 and the total fixed expenses are $17,500. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage? (Round your answer to 2 decimal places.)
15. Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $4,200 and the total fixed expenses are $17,500. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in unit sales? (Round your intermediate calculations and final answer to 2 decimal places.)
Contribution is the amount of earnings left after deducting all direct costs from the revenue from sales. It is ascertained to learn about the company’s profitability before subtracting the fixed costs.
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