2. Change all of the numbers in the data area of your worksheet so that it looks

Question

2. Change all of the numbers in the data area of your worksheet so that it looks like this Chapter 5: Applying Excel 3 Data 4 Unit sales 5 Selling price per unit 6 Variable expenses per unit 7 Fixed expenses 50,000 units $20 per unit $12 per unit $320,000 If your formulas are correct, you should get the correct answers to the following questions (a) What is the break-even in dollar sales? reak-even in les (b) What is the margin of safety percentage? Margin of safety rcentage (c) What is the degree of operating leverage? (Round your answer to 2 decimal places.) Degree of operating leverage

Explanation / Answer

Units sales 50000 Selling price 20 Sales 1000000 Less: variable expenses 600000 Contribution margin 400000 Fixed cost 320000 Net income 80000 Contribution margin ratio 0.4 a). Break even dollar sales (Fixed cost / contribution margin ratio) (320000/40% (320000/40% 800000 b) margin of safety percentage (Actual sales-breakeven sales)/actual sales (1000000-800000)/1000000 0.2 or 20% c) Degree of operating leverage (Contribution margin/net income (400000/80000) 5 current 20% increase in unit sales 3) Units sales 50000 60000 Selling price 20 20 Sales 1000000 1200000 Less: variable expenses 600000 720000 Contribution margin 400000 480000 Fixed cost 320000 320000 Net income 80000 160000 Contribution margin ratio 0.4 0.4 percentage increase in net operating income 0.33 or 33% 4a) Units sales 60000 Selling price 20 Sales 1200000 Less: variable expenses 720000 Contribution margin 480000 Fixed cost 320000 Net income 160000 percentage increasse in net operating income (60000-50000)/(160000-80000) 12.50%

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