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What was the degree of operating leverage

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Question - Titus Comp. produces lamps and mirrors. The company's external income statements for the last two years are given below:

2012 2013 2014?

Units Sold 145,000 185,000

Sales Revenue $ 2,160,000 $ 2,700,000

Cost of Goods Sold 1,358,000 1,718,000

Gross Margin 802,000 982,000

S, G & A 210,000 210,000

Net Operating Income $ 592,000 $ 772,000

The company has no beginning or ending inventories. Manufacturing costs are mixed, while S, G&A costs are strictly fixed.

Required:

1. Use the "high-low" method to estimate the variable manufacturing cost per unit and the total fixed manufacturing cost.

2. How much total contribution margin was earned in 2012 year?

3. What was the degree of operating leverage in 2013?

4. If sales increase by 10% from 2013 to 2014, how much net operating income will the company earn in 2014?

5. Assume that total assets decreased from $15,000,000 to $10,000,000 during 2013. The company's minimum acceptable rate of return is 5%. Compute the following for 2013:

Return on Sales

Investment Turnover

Return on Investment

Residual Income

Reference no: EM131988084

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