80.2K

Verified Solution

Link Copied!

BGB Tuna Processing manufactures and sells canned tuna to restaurants. Variable cost per can amounts to $$13$ and the selling price of each can is $$30.$ Total annual fixed costs amount to $$9,663,158.$ Sales are estimated to amount to $1,200,000$ cans of tuna.

Do not enter dollar signs or commas in the input boxes.

Round dollar answers to the nearest whole number and round BE units up to the nearest whole number, unless otherwise indicated.

a$)$ Calculate the following values.

Gross Sales:

Total Variable Costs:

Contribution Margin:

Operating Profit:

b$)$ If the company sells according to their estimates, what is the degree of operating leverage? The break$-$even point $($in units$)?$

Round the degree of operating leverage to $2$ decimal places.

Degree of operating leverage:

Break$-$even Point $($units$)$:

c$)$ If the company increases the sales volume $($cans$)$ by $28\%,$ by what percentage will operating profit increase? By what dollar amount will operating income increase? Use the degree of operating leverage.

Round the percentage increase to $2$ decimal places.

Percentage Increase:

Dollar Increase:

d$)$ If the company spends $$28,000$ as additional advertising expense $($fixed cost$),$ sales volume will increase by $8\%.$ Determine the new operating leverage and the new break$-$even point in units.

Round the degree of operating leverage to $2$ decimal places.

Degree of operating leverage:

Break$-$even point $($units$)$:

Answer & Explanation Solved by verified expert

See Answer