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Break$-$Even in Units, Target Income, New Unit Variable Cost, Degree of Operating Leverage, Percent Change in Operating Income

Reagan, Inc., has developed a chew$-$proof dog bed$$the Tuff$-$Pup. Fixed costs are $$210,000$ per year. The average price for the Tuff$-$Pup is $$37,$ and the average variable cost is $$23$ per unit. Currently, Reagan produces and sells $20,000$ Tuff$-$Pups annually.

Required:

Question Content Area

$1.$ How many Tuff$-$Pups must be sold to break even?

fill in the blank $387$d$33$f$5$efe$5007\_1$

units

$2.$ If Reagan wants to earn $$92,400$ in profit, how many Tuff$-$Pups must be sold?

fill in the blank $387$d$33$f$5$efe$5007\_2$

units

Question Content Area

Prepare a variable$-$costing income statement to verify your answer.

blank

Reagan, Inc.

Variable$-$Costing Income Statement

$$-$ Select $-$

$-$ Select $-$

$$-$ Select $-$

$-$ Select $-$

$$-$ Select $-$

Question Content Area

$3.$ Suppose that Reagan would like to lower the break$-$even units to $10,500.$ The company does not believe that the price or fixed cost can be changed. Calculate the new unit variable cost that would result in break$-$even units of $10,500.$ If required, round your intermediate computations and final answer to the nearest cent.Required:

How many Tuff$-$Pups must be sold to break even?

units

If Reagan wants to earn $$92,400$ in profit, how many Tuff$-$Pups must be sold?

units

Prepare a variable$-$costing income statement to verify your answer.

Reagan, Inc.

Variable$-$Costing Income

Statement

Suppose that Reagan would like to lower the break$-$even units to $10,500.$ The company does not believe that the price or fixed cost can be changed.

Calculate the new unit variable cost that would result in break$-$even units of $10,500.$ If required, round your intermediate computations and final

answer to the nearest cent.

$

What is Reagan's current contribution margin and operating income?

Current contribution margin

Current operating income

Calculate the degree of operating leverage. Round your answer to three decimal places.

If sales increased by $10$ percent next year, what would the percent change in operating income be$?$ Use your rounded answer to the question above in

your computations, and round your final percentage answer to two decimal places $($for example, $45\mathrm{.}555\%$ would be entered as $"{45\mathrm{.}56}^{\text{I}}).$

$\%$

What would the new total operating income for next year be$?$ Round your answer to the nearest dollar.

$$

Reagan, Inc., has used data on the Tuff$-$Pup to answer a number of different questions. Identify the data analytic type $($descriptive$,$ diagnostic,

predictive, or prescriptive$)$ that Reagan used to answer these questions. $($See Exhibits $2\mathrm{.}5$ and $2\mathrm{.}6,$ for a review of data analytic types. Note: More than one

analytic type might apply.$)$

analysis will help Reagan understand the break$-$even point and units needed to earn a target profit.

I analysis helps Reagan to understand what happens when variables are changed.

I analysis would be used if Reagan determines that a target profit must be earned and then uses the data to change price, variable

cost$,$ and fixed cost to achieve that profit.

Data analytics would be used

in Requirement $3$ as Reagan decides to lower the break$-$even point and uses the analysis to determine

why the breakeven is higher than desired.

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