Reference no: EM132707345

Problem 1: Smith Company manufactures fish tanks. One of the fish tanks that the company produces is a 2.6 gallon fish tank that the company sells for $37.50. The fish tanks are manufactured in an outdated fish tank manufacturing facility that is labor intense, relying heavily on direct labor workers. Variable costs are high, totaling $22.50 per 2.6 gallon fish tank of which 60% is direct labor cost. Last year the company sold 40,000 2.6 gallon fish tanks and had $480,000 in fixed expense associated with the 2.6 gallon fish tank. Compute a the contribution ratio, compute a break even in number of 2.6 gallon fish tanks and compute the degree of operating leverages of last years level of sales.