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Stratford Company distributes a lighweight lawn chair that sells for $15 per unit. V
Required:
Answer the following independent questions:
5. Refer to the original data. Assume that the company sold 28,000 units last
PRODUCT'S CM RATIO:
Selling price per unit $ 15
less:Variable cost per unit $ 6
CONTRIBUTION PER UNIT $ 9
Contribution margin ratio = Contribution
a Sales $ 360,000
less:Variable expenses $ 144,000
Contribution Margin $ 216,000
Fixed expenses $ 180,000
Net Operating Income $ 36,000
Degree of Operating Leverage=
Contribution Margin/Net Income 6
INCOME STATEMENT
BASED ON RESULTS OF LAST YEAR OPERATIONS
a Sales in units 28,000
Selling price per unit $ 15
Sales $ 420,000
less:Variable expenses @ $6 per unit $ 168,000
CONTRIBUTION MARGIN $ 252,000
less:Fixed Expenses $ 180,000
NET OPERATING INCOME $ 72,000
b INCOME STATEMENT
BASED ON CHANGES PROPOSED BY THE SALES MANAGER
ear due to increased demand. By how much should net operating income increase?
of sales.
how much should net operating income increase?
year. The sales manager is convinced that a 10% reduction in the selling price, combined with a $70,0
TEMENTS
EXPECTED 42,000 UNITS
TOTAL PER UNIT DIFFERENCE
$ 567,000 $ 13.50 $ 147,000
$ 252,000 $ 6 $ 84,000
$ 315,000 $ 7.50 $ 63,000
$ 250,000 $ 70,000
$ 65,000 $ (7,000)