Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. feather friends, incorporated, distributes a high-

Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable...

60.1K

Verified Solution

Question

Accounting

Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable expenses are $8 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows:

Sales (18,000 units) $ 360,000
Variable expenses 144,000
Contribution margin 216,000
Fixed expenses 180,000
Operating income $ 36,000

Required:

Answer each question independently based on the original data:

1. What is the product's CM ratio?

2. Use the CM ratio to determine the break-even point in sales dollars.

3. Assume this years total sales increase by $55,000. If the fixed expenses do not change, how much will operating income increase?

Assume that the operating results for last year were as in the question data.

4-a. Compute the degree of operating leverage based on last years sales.

4-b. The president expects sales to increase by 22% next year. Using the degree of operating leverage from last year, what percentage increase in operating income will the company realize this year? Calculate the dollar increase in operating income.

(how would you calculate Dollar increase in operating income?)

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: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students