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Voltar Company manufactures and sells a telephone answering machine. The companys contribution format income statement...

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Accounting

Voltar Company manufactures and sells a telephone answering machine. The companys contribution format income statement for the most recent year is given below:

Less fixed expenses 240,000

Management is anxious to improve the companys profit performance and has asked for several item of information.

Required:

  1. Compute the Companys CM ratio and variable expense ratio.

  1. Compute the companys break-even point in both units and sales dollars.

  1. Assume that sales increase by $400,000 next year. If cost behaviour patterns remain unchanged by how much will the companys operating profit income increase? Use the CM ratio to determine your answer.

  1. Compute the companys margin of safety in both dollars and percentage form.

  1. Compute the companys degree of operating leverage at the present level of sales.

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