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Exodus Company produces variety of products. One division makes neoprine wetsuits. The division's projected income...

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Accounting

Exodus Company produces variety of products. One division makes neoprine wetsuits. The division's projected income statement for the coming year is as follows:

Sales (65,000 units)15,600,000

Less: Variable expenses8,736,000

Contribution Margin6,864,000

Less: Fixed expense4,012,000

Operating income2,852,000

Required:

1.Compute the contribution margin per unit, calculate the break-even point in units and sales.

2.The manager has decided to increase the advertising budget by 140,000 and cut the average selling price to 200. These actions will increase sales revenue by 1,000,000. Will this improve the division's financial situation? have a new income statement to support your answer.

3.Suppose sales revenues exceed the estimated amount on the income statement by 612,000. How much profits are underestimated?

4.How many units must be sold to earn after-tax profit of 1.254M? Assume a tax rate of 34 percent.

5.Compute the margin of safety in sales revenue.

6.Compute the operating leverage based on the given income statement (round to two decimal places). If sales revenues are 20% greater than expected, what is the percentage increase in profits? How much is the increase in profits?

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