990 Camino Coronado For1 | M your inquiry on 7520 Merce 7520 Mercedes Way, Rohre
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990 Camino Coronado For1 | M your inquiry on 7520 Merce 7520 Mercedes Way, Rohre | Ch 5 Found > O eztomheducation.com hm.tpx?-0.744847956838036 1520208096474 ACCOUNTING 5 Foundation Questions 1-15 (of 15) The following information applies to the questions displayed below 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): Sales Variable expenses S 21,800 12,600 Contribution margin Fixed expenses 9,200 7.452 Net operating income $ 1,748 10.00 points Type here to search Esc F1 F2 F3 2 pExplanation / Answer
11.A. To find out Margin of safety sales, first we should find out BEP Sales.
BEP sales=Fixed cost ÷Pv ratio
PV Ratio = contribution ÷sales×100
=9,200÷21,800×100=42.2%
BEP Sales= Fixed cost ÷Pv ratio
=7,452÷42.2%=17,659(rounded off)
Margin of safety
in dollars = Actual sales - BEP sales
=21,800-17,659=$4,141
11.B.Margin of safety percentage=Mos sales÷Actual sales ×100=$4,141÷21,800×100=18.9954%.
12. Degree of operating leverage= contribution margin ÷ operating income
= 9,200÷1,748=5.263.
13.Here the operating leverage is 5.263 which means , a 10 percent increase in sales will result in 52.63% increase in income.
Likewise if the sales are increased by 5%, it will result in 26.315% increase in income.
14. The Degree of operating leverage at this situation will be
Contribution margin÷ Net operating income
=14,348÷1,748= 8.208
15. At this given situation, using the new operating leverage, the estimated percent increase in net operating income at 5% increase in sales will be 41.04% since 1% increase increase in sales will result in 8.208% increase in operating income.
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