A	B	C	D
1	Chapter 5: Applying Excel
2
3	Data
4	Unit sales	30,000	units
5	Selling price per unit	$70	per unit
6	Variable expenses per unit	$42	per unit
7	Fixed expenses	$420,000
8

If your formulas are correct, you should get the correct answersto the following questions.

(a)	What is the break-even in dollarsales?

      

(b)	What is the margin of safety percentage?

      

(c)	What is the degree of operating leverage? (Round youranswer to 2 decimal places.)

      

3.	Using the degree of operating leverage and without changinganything in your worksheet, calculate the percentage change in netoperating income if unit sales increase by 20%.

       

4.	Confirm your calculations in Requirement 3 above by increasingthe unit sales in your worksheet by 20% so that the Data area lookslike this:
	A B C D 1 Chapter 5: Applying Excel 2 3 Data 4 Unit sales 36,000 units 5 Selling price per unit $70 per unit 6 Variable expenses per unit $42 per unit 7 Fixed expenses $420,000 8

(a)	What is net operating income? (Negative amount should beindicated by a minus sign.)

      

(b)	By what percentage did the net operating income increase?

      

5.

Thad Morgan, a motorcycle enthusiast, has been exploring thepossibility of relaunching the Western Hombre brand of cycle thatwas popular in the 1930s. The retro-look cycle would be sold for$17,000 and at that price, Thad estimates 400 units would be soldeach year. The variable cost to produce and sell the cycles wouldbe $13,600 per unit. The annual fixed cost would be $1,224,000.

a.	What is the break-even in unitsales?

      

b.	What is the margin of safety in dollars?

      

c.	What is the degree of operatingleverage? (Round your answer to 2 decimalplaces.)

      

Thad is worried about theselling price. Rumors are circulating that other retro brands ofcycles may be revived. If so, the selling price for the WesternHombre would have to be reduced to $14,200 to compete effectively.In that event, Thad would also reduce fixed expenses to $1,139,000by reducing advertising expenses, but he still hopes to sell 400units per year.

d.	What would the net operatingincome be in this situation? (Negative amount should beindicated by a minus sign.)