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
	$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
	$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.)

 

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.