Thursday 1 May 2014

Problem 6-211 [LO8] Langin Corporation has provided its contribution format income statement for June. Sales $ 783,160 Variable expenses 427,000 ________________________________________ ________________________________________ Contribution margin 356,160 Fixed expenses 271,360 ________________________________________ ________________________________________ Net operating income $ 84,800 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ Required: a. Compute the degree of operating leverage to two decimal places. Degree of operating leverage b. Using the degree of operating leverage, estimate the percentage change in net operating income that should result from a 15% increase in sales. (Round your answer to 2 decimal places. Omit the "%" sign in your response.) Percentage change in net operating income % Explanation: a. Degree of operating leverage = Contribution margin/Net operating income = $356,160/$84,800 = 4.20 b. Percent increase in net operating income = Percent increase in sales × Degree of operating leverage = 15% × 4.20 = 63.00%



Problem 6-211 [LO8]
Langin Corporation has provided its contribution format income statement for June.
 



  Sales
$
783,160  
  Variable expenses

427,000  





  Contribution margin

356,160  
  Fixed expenses

271,360  





  Net operating income
$
84,800  











 
Required:
a.
Compute the degree of operating leverage to two decimal places.
 
  Degree of operating leverage

 
b.
Using the degree of operating leverage, estimate the percentage change in net operating income that should result from a 15% increase in sales. (Round your answer to 2 decimal places. Omit the "%" sign in your response.)
 
  Percentage change in net operating income
%  


Explanation:
a.
Degree of operating leverage = Contribution margin/Net operating income = $356,160/$84,800 = 4.20

b.
Percent increase in net operating income = Percent increase in sales × Degree of operating leverage = 15% × 4.20 = 63.00%

Monsky Corporation produces and sells a single product whose con... Monsky Corporation produces and sells a single product whose contribution margin ratio is 75%. The company's monthly fixed expense is $413,000 and the company's monthly target profit is $140,500. The dollar sales to attain that target profit is closest to: $309,750 $738,000 $415,125 $550,667



Monsky Corporation produces and sells a single product whose con...
Monsky Corporation produces and sells a single product whose contribution margin ratio is 75%. The company's monthly fixed expense is $413,000 and the company's monthly target profit is $140,500. The dollar sales to attain that target profit is closest to:
$309,750
correct
$738,000
$415,125
$550,667


Answer
$738,000

MC Qu. 38 The break-even point in dollar sales for Rice Company is $bep an... The break-even point in dollar sales for Rice Company is $342,000 and the company's contribution margin ratio is 34%. If Rice Company desires a profit of $101,320, sales would have to total: $559,600 $458,280 $640,000 $265,255


The break-even point in dollar sales for Rice Company is $bep an...
The break-even point in dollar sales for Rice Company is $342,000 and the company's contribution margin ratio is 34%. If Rice Company desires a profit of $101,320, sales would have to total:
$559,600
$458,280
correct
$640,000
$265,255
 

Answer
$640,000

Deavila Inc. produces and sells two products. Data concerning those products for the most recent month appear below: Product Q91I Product J53Z Sales $ 15,800 $ 11,800 Variable expenses $ 5,800 $ 5,060 ________________________________________ Fixed expenses for the entire company were $13,930. Required: a. Determine the overall contribution margin ratio for the company. (Round your answer to 2 decimal places.) Contribution margin ratio b. Determine the overall break-even point in total sales dollars for the company. (Round your intermediate calculation to 2 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.) Break-even point $ c. If the sales mix shifts toward Product Q91I with no change in total sales, what will happen to the break-even point for the company? It will result in a decrease in the company's overall break-even point. Explanation: a. Product Q91I Product J53Z Total Sales $ 15,800 $ 11,800 $ 27,600 Variable expenses 5,800 5,060 10,860 ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ Contribution margin $ 10,000 $ 6,740 16,740 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ Fixed expenses 13,930 ________________________________________ ________________________________________ Net operating income $ 2,810 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ Overall CM ratio = Total contribution margin/Total sales = $16,740/$27,600 = 0.61 b. Break-even point in total sales dollars = Fixed expenses/Overall CM ratio = $13,930/0.61 = $22,836 c. Product Q91I Product J53Z Sales (a) $ 15,800 $ 11,800 Contribution margin (b) $ 10,000 $ 6,740 CM ratio (b)÷(a) 0.633 0.571 ________________________________________ Since Product Q91I's CM ratio is greater than Product J53Z's, a shift in the sales mix toward Product Q91I will result in a decrease in the company's overall break-even point.




Deavila Inc. produces and sells two products. Data concerning those products for the most recent month appear below:
 

Product Q91I  
Product J53Z  
  Sales

$
15,800  


$
11,800  

  Variable expenses

$
5,800  


$
5,060  



 
Fixed expenses for the entire company were $13,930.
 
Required:
a.
Determine the overall contribution margin ratio for the company. (Round your answer to 2 decimal places.)
 


b.
Determine the overall break-even point in total sales dollars for the company. (Round your intermediate calculation to 2 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

  Break-even point
$  

c.
If the sales mix shifts toward Product Q91I with no change in total sales, what will happen to the break-even point for the company?

It will result in a decrease in the company's overall break-even point.


Explanation:
a.

Product
Q91I
Product
J53Z
Total  
  Sales
$
15,800  
$
11,800  
$
27,600  
  Variable expenses

5,800  

5,060  

10,860  













  Contribution margin
$
10,000  
$
6,740  

16,740  



















  Fixed expenses





13,930  









  Net operating income




$
2,810  















 
Overall CM ratio = Total contribution margin/Total sales = $16,740/$27,600 = 0.61

b.
Break-even point in total sales dollars = Fixed expenses/Overall CM ratio = $13,930/0.61 = $22,836

c.

 Product Q91I
Product J53Z
  Sales (a)

$
15,800


$
11,800

  Contribution margin (b)

$
10,000


$
6,740

  CM ratio (b)÷(a)


0.633



0.571




Since Product Q91I's CM ratio is greater than Product J53Z's, a shift in the sales mix toward Product Q91I will result in a decrease in the company's overall break-even point.