Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. 7-1b cvp analysis, margin of safety, degree of op

7-1B CVP Analysis, Margin of Safety, Degree of Operating Leverage Floras Flats...

50.1K

Verified Solution

Question

Accounting

7-1B CVP Analysis, Margin of Safety, Degree of Operating Leverage
Floras Flats produces comfortable and portable womens shoes designed to be worn as a second
pair of shoes after a formal event. The company has the following financial information:
The companys sales price is $20 per unit. The variable costs of producing flats is $6 per unit.
The company expects to have fixed costs of $10,000 next year. The company expects to sell
1,000 pairs of flats next year. Assume no taxes.
a.) Calculate the breakeven point in units.
b.) Calculate the breakeven point in dollars.
c.) How many units must the company sell to reach a target profit of $25,000?
d.) Prepare a budgeted contribution format income statement.
e.) Compute the margin of safety in both dollar and percentage terms.
f.) Compute the degree of operating leverage.
g.) If sales increase by 20% in the following year, how much would net income increase (use
the degree of operating leverage to compute your answer).

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

describe in detail three theories that come from the book: Good to Great include an illustrative...

Operations Management
Q

In a pumping test of a confined aquifer, the steady state water level in an observation...

Civil Engineering
Q

discuss the causes, development , and course of chronic lung disease and other conditions that arise...

Medical Sciences
Q

1) Identify activities/transactions associated with companies engaged in the development stage. 2) Identify activities/transactions associated with companies engaged...

Accounting
Q

A rectangular swimming pool has a length of 11 feet, a width of 25 feet...

Geometry
Q

A total of 568 tickets were sold for the school play. They were either adult...

Basic Math
Q

The points at which a graph changes direction (from increasing to decreasing or decreasing to...

Basic Math
Q

. AT&T 9:01 PM O 52% 4.1 X...

Accounting
Q

Marvel Parts, Inc., manufactures auto accessories. One of the companys products is a set of...

Accounting
Q

Receivables 521 recorded the following: Sales of $185,000 ($164,000 on account: $21,000 for cash), Ignore...

Accounting
Q

Determine the amount to invest in stock mutual funds based on the remaining money and...

Finance
Q

Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is...

Accounting