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 2 3 Data 4 Unit sales 5 Selling price per unit 6 Variable expenses per unit 10,000 units $20 per unit $10 per unit Fixed expenses $95,000 If your formulas are correct, you should get the correct answers to the following questions. (a) What is the break-even in dollar sales? Break-even in dollar sales (b) What is the margin of safety percentage? Margin of safety percentage (c) What is the degree of operating leverage? (Round your answer to 2 decimal places.) gree of operating leverage

Explanation / Answer

Answer (a). BEP (in $) = Fixed Cost / Contribution Margin Ratio Contribution Margin Ratio = Contribution / Sales Contribution Margin Ratio = ($20 - $10) / $20 = 50% BEP (in $) = $95,000 / 50% BEP (in $) = $190,000 Answer (b). Margin of Safety Percentage = (Actual Sales - BEP) / Actual Sales Margin of Safety Percentage = ($200,000 - $190,000) / $200,000 Margin of Safety Percentage = 5% Answer ©. Degree of Operating Leverage = Contribution Margin / Operating Income Contribution Margin = $10 (Contribution Margin per Unit) x 10,000 Units Contribution Margin = $100,000 Operating Income = $100,000 - $95,000 Operating Income = $5,000 Degree of Operating Leverage = $100,000 / $5,000 Degree of Operating Leverage = 20 times

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