Reference no: EM132871526

Problem -

1. Chillmax Company had planned to sell 3,500 pairs of shoes at $60 each in the coming year. Unit variable cost is $21 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense). Operating income at 3,500 units sold is $58,500. The degree of operating leverage is 2.3. Now Chillmax expects to increase sales by 10% next year.

1. Calculate the percent change in operating income expected.

2. Calculate the operating income expected next year using the percent change in operating income calculated in Requirement 1.

2. Suppose that Larimer Company sells a product for $24. Unit costs are as follows: Total fixed factory overhead is $26,500 per year, and total fixed selling and administrative expense is $15,260.

Calculate the variable cost per unit and the contribution margin per unit.

Calculate the contribution margin ratio and the variable cost ratio.