PLEASE HELP ASAP & TO YOUR BEST ABILITY. Thank you. Sonic produces and sells a p

Question

PLEASE HELP ASAP & TO YOUR BEST ABILITY. Thank you.

Sonic produces and sells a product with the following information:

Unit selling price $110 per unit Unit variable production costs:

Direct materials $30 per unit Direct labor $12 per unit

Variable overhead $3 per unit

Fixed production costs 140,000

Total Variable selling costs $4 per unit

Fixed selling costs $200,000 total ---->

Compute Luigi's degree of operating leverage. Enter your answer as a decimal and if rounding is necessary, round to two decimal places (for example 1.25)

If unit sales are projected to decrease by 8%, use your degree of operating leverage to predict the change in net income. Enter the DOLLAR amount of the expected change in net income--enter your number as a positive number--you will be asked in the next question whether the increase will be positive or negative.

Will the change in net income be an increase or a decrease? Type in 1 for increase; type in 2 for decrease.

Prepare a net variable costing income statement reflecting an 8% decrease in unit sales.

What was the dollar amount of change in the net income? Type in your answer as a positive number.

If 10,000 units are produced and 9,000 units are sold, what is the amount of absorption costing net income?

If 10,000 units are produced and 9,000 units are sold, what is the dollar amount of variable costing net income?

If 10,000 units are produced and 9,000 units are sold, explain any difference between the absorption costing and variable costing net income.

If 10,000 units are produced and 10,000 units are sold, what is the dollar amount of absorption costing net income?

If 10,000 units are produced and 10,000 units are sold, what is the dollar amount of variable costing net income?

If 10,000 units are produced and 10,000 units are sold explain any difference in the absorption costing and variable costing net income.

If 10,000 units are produced and 12,000 units are sold, what is the dollar amount of absorption costing net income?

If 10,000 units are produced and 12,000 units are sold, what is the dollar amount of variable costing net income?

If 10,000 units are produced and 12,000 units are sold, explain any differences between the absorption costing net income and the variable costing net income.

Explanation / Answer

a) Degree of operating leverage = Contribution Margin/ Operating Income DOL = $531,000/$191,000 $2.78 Sales (9000 units x $110) $990,000.00 Less: Variable Cost = 9000 x ($32 + $12 + $3 +$4) $459,000.00 Contribution Margin $531,000.00 Less Fixed Cost ($140,000 + $200,000) $340,000.00 Net Operating Income $191,000.00 b) Sales (9000 unitsX 92% x $110 x $910,800.00 Less: Variable Cost = 9000 x 92% x ($32 + $12 + $3 +$4) $422,280.00 Contribution Margin $488,520.00 Less Fixed Cost ($140,000 + $200,000) $340,000.00 Net Operating Income $148,520.00 Thus a 8% decrease in sales would decrease profits by 22.24% (8%× 2.78) Reduction in net income = ($148,520 - $191,000)/$191000 -$0.22 c) Change in Net Income Decrease 2 d) Sales (9000 unitsX 92% x $110 x $910,800.00 Less: Variable Cost = 9000 x 92% x ($32 + $12 + $3 +$4) $422,280.00 Contribution Margin $488,520.00 Less Fixed Cost ($140,000 + $200,000) $340,000.00 Net Operating Income $148,520.00

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