Reference no: EM13343190
Problem Cost-Volume-Profit Relationships
The Esposito Dental Products Company's most recent income statement is shown below:
(CALCULATE ALL CHANGES FROM THE BEGINNING SCENARO OF NUMBERS)
|
|
Total
|
Per unit
|
|
Sales (10,000 units)
|
$400,000
|
$40
|
|
Variable expenses
|
250,000
|
25
|
|
Contribution margin
|
150,000
|
$15
|
|
Fixed expenses
|
105,000
|
|
|
Net operating income
|
$ 45,000
|
|
1. The sales volume increases by 25% and the price decreases by $2.00 per unit.
2. The selling price decreases $4.00 per unit, fixed expenses increase by $16,000, and the sales volume increases by 50%.
3. The selling price increases by 25%, variable expense increases by $5.50 per unit, and the sales volume decreases by 30%.
4. The selling price increases by $6.50 per unit, variable cost increases by $5.75 per unit, fixed expenses increase by $28,400, and sales volume decreases by 12%. Using the degree of operating leverage, calculate the increase in profits resulting from an increase in sales of 15%.
Calculate the Degree of Operating Leverage and Margin of Safety where referenced in the answer template.