Laraia Corporation has provided the following contribution format income statement.All questions concern situations that are within the relevant range.
Required:
a.What is the contribution margin per unit?
b.What is the contribution margin ratio?
c.What is the variable expense ratio?
d.If sales increase to 3,050 units,what would be the estimated increase in net operating income?
e.If sales decline to 2,900 units,what would be the estimated net operating income?
f.If the selling price increases by $4 per unit and the sales volume decreases by 200 units,what would be the estimated net operating income?
g.If the variable cost per unit increases by $5,spending on advertising increases by $3,000,and unit sales increase by 450 units,what would be the estimated net operating income?
h.What is the break-even point in unit sales?
i.What is the break-even point in dollar sales?
j.Estimate how many units must be sold to achieve a target profit of $54,000.
k.What is the margin of safety in dollars?
l.What is the margin of safety percentage?
m.What is the degree of operating leverage?
n.Using the degree of operating leverage,what is the estimated percent increase in net operating income of a 15% increase in sales?
Definitions:
Substitution Effect
The effect observed when consumers replace more expensive items with cheaper alternatives due to changes in relative price levels, affecting demand for goods.
Utility Function
Describes how different combinations of goods or services (or different outcomes) provide levels of satisfaction or utility to an individual.
Substitution Effect
The change in consumption patterns due to changes in the relative prices of goods, leading consumers to substitute more expensive items with cheaper alternatives.
Giffen Good
A product that experiences an increase in demand as its price increases, contrary to the law of demand, typically because it is a staple whose cheaper substitutes are not as affordable.
Q13: The company's net operating income for the
Q21: What was the absorption costing net operating
Q36: The best estimate of the total cost
Q64: Salmont Corporation uses the FIFO method in
Q66: The unit product cost under variable costing
Q87: Using the FIFO method,the equivalent units for
Q130: What are the equivalent units for conversion
Q163: Entry (4)in the below T-account could represent
Q198: The smaller the contribution margin ratio,the smaller
Q225: Shelhorse Corporation produces and sells a single