Oslo Company prepared the following contribution format income statement based o

Question

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Required (Answer each question independently and always refer to the original data unless instructed otherwise.) % per unit $ Units sold Sales $20,000.00 100% $20.00 1000 Variable expenses $12,000.00 60% $12.00 Contribution Margin $8,000.00 40% $8.00 Fixed Expenses $6,000.00 Net operating income $2,000.00 7.If the variable cost per unit increases by $1, spending on advertising increases by $1,500, and unit sales increase by 250 units, what would be the net operating income? 8.What is the break even point in unit sales? 9.What is the break even point in sales dollars? 10.How many units must be sold to achieve a target profit of $5,000? 11.What is the margin of safety in dollars? What is the margin of safety percentage? 12.What us tge degree of operating leverage? 13.Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 5% increase in sales? 14.Assume that the amounts of the company's total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $6,000 and the total fixed expenses are $12,000. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage? 15.Using the degree of operating leverage that you computed in the previous question, what is the estimated percent increase in net operating income of a 5% increase in sales?

Explanation / Answer

7.If the variable cost per unit increases by $1, spending on advertising increases by $1,500, and unit sales increase by 250 units, what would be the net operating income? New VC per unit = 12+1 = 13 New FC = 6000+1500 = 7500 New Sales = 1250*20 = 25000 Variable Cost = 1250*13 = 16250 Contribution = 8750 Profit = 8750-7500 = 1250 8.What is the break even point in unit sales? Break even point = FC/ Contribution per unit = 6000/8 = 750 units 9.What is the break even point in sales dollars? = 750*20 = 15000 10.How many units must be sold to achieve a target profit of $5,000? Target Contribution = FC+Target Profit = 6000+5000 = 11000 No. of units = 11000/8 = 1375 units Please rate this answer as lifesaver & repost the remaining questions as a separate question dear because answering such long questions in not worthwhile. Please rate this answer for the untiring efforts dear. Thank u in advance. God Bless u :) Answers for 11-15 after u rate this as lifesaver. Thank u dear :)

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