The Following Is Alsatia Corporation's Contribution Format Income Statement for Last

question 19

Essay

The following is Alsatia Corporation's contribution format income statement for last month:
$\begin{array}{|l|r|}\hline \text { Sales } & \$ 1,400,000 \\\hline \text { Less: variable expenses } & 900,000 \\\hline \text { Contribution margin } & 500,000 \\\hline \text { Less: fixed expenses } & \underline{300,000} \\\hline \text { Operating income } & \$ 200,000 \\\hline\end{array}$
The company has no beginning or ending inventories and produced and sold 10,000 units during the month.
Required:
a)What is the company's contribution margin ratio?
b)What is the company's break-even in units?
c)If sales increase by 100 units,by how much should operating income increase?
d)How many units would the company have to sell to attain target operating income of $225,000?
e)What is the company's margin of safety in dollars?
f)What is the company's degree of operating leverage?

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Definitions:

Spending Variance

A measure indicating the disparity between what was anticipated to be spent and what was actually expended in financial terms.

Employee Salaries

The monetary compensation paid to employees for their labor, typically on a monthly or yearly basis.

Net Operating Income

The total profit of a company after operating expenses are subtracted from gross profit, but before income taxes and interest are deducted.

Flexible Budget

A budget that adjusts or flexes with changes in the volume or activity levels, allowing for more accurate budgeting in variable cost areas.