Reference no: EM132760779

Income statement of manufacturing operations Units $

Sales 360,000 7,500,000

Variable cost 3,500,000

Contribution Margin 4,000,000

Fixed Expenses 2,500,000

Net profit 1,500,000

Problem 1: What is the operating leverage in dollars and %? If Sales increase by 5% how much will net income increase?

Problem 2: The company president has an idea to improve operations and sales. He believes that increasing marketing expense by $100,000 and offering an extra 2 dollars sales commission will increase number of units by 10,000. What should the company do?

Problem 3: Next year due to increased competition selling prices will drop 5%. Management wants to maintain the same net profit as this year ($1.5 Mill). Assuming all other costs are the same, How many units must be sold to reach this goal?

Problem 4: Due to expansion of the factory underway capital investments have resulted in fixed costs of additional $150,000 next year. What is the Net profit, BEP and MOS likely from current operations? (BEP in units and dollars)