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.......... Variable expenses.......... Contribution margin.. Fixed expenses. Operating income. 3. 4. $ 20,000 12,000 8,000 Requirements: (For each of the following independent situations, always go back to the original question data to answer the requirement.) 5. 6. 7. 6,000 $ 2,000 1. What is the contribution margin per unit? 2. What is the contribution margin ratio? If sales decrease to 825 units, what would be the increase (or decrease) in operating income? Assume you are considering a strategic marketing change that will increase the variable cost per unit by $1, spending on advertising increases by $1,500, and unit sales increase by 250 units, what would be the operating income? Should you make this change (base your response solely upon the change in operating income)? What is the break-even point in unit sales? How many units must be sold to achieve a target profit of $16,000? What is the margin of safety in sales dollars? What is the margin of safety percentage?
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.......... Variable expenses.......... Contribution margin.. Fixed expenses. Operating income. 3. 4. $ 20,000 12,000 8,000 Requirements: (For each of the following independent situations, always go back to the original question data to answer the requirement.) 5. 6. 7. 6,000 $ 2,000 1. What is the contribution margin per unit? 2. What is the contribution margin ratio? If sales decrease to 825 units, what would be the increase (or decrease) in operating income? Assume you are considering a strategic marketing change that will increase the variable cost per unit by $1, spending on advertising increases by $1,500, and unit sales increase by 250 units, what would be the operating income? Should you make this change (base your response solely upon the change in operating income)? What is the break-even point in unit sales? How many units must be sold to achieve a target profit of $16,000? What is the margin of safety in sales dollars? What is the margin of safety percentage?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Complete questions with proper format and detail.
Transcribed Image Text: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..........
Variable expenses..........
Contribution margin..
Fixed expenses.
Operating income.
3.
4.
$ 20,000
12,000
8,000
Requirements:
(For each of the following independent situations, always go back to the original question data to
answer the requirement.)
5.
6.
7.
6,000
$ 2,000
1. What is the contribution margin per unit?
2.
What is the contribution margin ratio?
If sales decrease to 825 units, what would be the increase (or decrease) in operating income?
Assume you are considering a strategic marketing change that will increase the variable cost per
unit by $1, spending on advertising increases by $1,500, and unit sales increase by 250 units, what
would be the operating income? Should you make this change (base your response solely upon
the change in operating income)?
What is the break-even point in unit sales?
How many units must be sold to achieve a target profit of $16,000?
What is the margin of safety in sales dollars? What is the margin of safety percentage?
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