Question 1

Whirly Corporations most recent income statement is shown below:

	Total		Per Unit
Sales (8,000 units)	$	240,000	$	30.00
Variable expenses		152,000		19.00
Contribution margin		88,000	$	11.00
Fixed expenses		55,100
Net operating income	$	32,900

Required:

Prepare a new contribution format income statement under each of the following conditions (consider each case independently):

1. The sales volume increases by 40 units.

2. The sales volume decreases by 40 units.

3.The sales volume is 7,000 units.

Question 2

Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below:

	Claimjumper		Makeover		Total
Sales	$	114,000	$	57,000	$	171,000
Variable expenses		28,360		5,840		34,200
Contribution margin	$	85,640	$	51,160		136,800
Fixed expenses						88,560
Net operating income					$	48,240

Required:

1. Compute the overall contribution margin (CM) ratio for the company.

2. Compute the overall break-even point for the company in dollar sales. (Do not round intermediate calculations. Round your answer to the nearest dollar amount.)

3. Complete the contribution format income statement at break-even point for the company showing the appropriate levels of sales for the two products. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Question 3

Miller Companys most recent contribution format income statement is shown below:

	Total	Per Unit
Sales (40,000 units)	$240,000	$6.00
Variable expenses	120,000	3.00
Contribution margin	120,000	$3.00
Fixed expenses	48,000
Net operating income	$ 72,000

Required:

Prepare a new contribution format income statement under each of the following conditions (consider each case independently): (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places.)

1. The number of units sold increases by 20%.

2. The selling price decreases by $1.40 per unit, and the number of units sold increases by 24%.

3. The selling price increases by $1.40 per unit, fixed expenses increase by $9,000, and the number of units sold decreases by 5%.

4. The selling price increases by 20%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 12%.

Question 4

Magic Realm, Inc., has developed a new fantasy board game. The company sold 33,200 games last year at a selling price of $61 per game. Fixed expenses associated with the game total $581,000 per year, and variable expenses are $41 per game. Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor.

Required:

1-a. Prepare a contribution format income statement for the game last year.

1-b. Compute the degree of operating leverage.

2. Management is confident that the company can sell 43,160 games next year (an increase of 9,960 games, or 30%, over last year).

a. Compute the expected percentage increase in net operating income for next year.

b. Compute the expected total dollar net operating income for next year. (Do not prepare an income statement; use the degree of operating leverage to compute your answer.)

Question 5

Olongapo Sports Corporation distributes two premium golf ballsthe Flight Dynamic and the Sure Shot. Monthly sales and the contribution margin ratios for the two products follow:

	Product
	Flight Dynamic	Sure Shot	Total
Sales	$680,000	$320,000	$1,000,000
CM ratio	67%	72%	?

Fixed expenses total $564,500 per month.

Required:

1. Prepare a contribution format income statement for the company as a whole. Round your percentage answers to 2 decimal places (i.e. .1234 is considered as 12.34).

2. Compute the break-even point for the company based on the current sales mix. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

3. If sales increase by $44,000 a month, by how much would you expect net operating income to increase? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)