Stratford Company distributes a lightweight lawn chair that sells for $120 per u
ID: 2368373 • Letter: S
Question
Stratford Company distributes a lightweight lawn chair that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $200,000 annually.
What is the product's CM ratio?(Do not round intermediate calculations.)
Use the CM ratio to determine the break-even point in sales dollars.(Do not round intermediate calculations. Round your answer to the nearest dollar amount. )
The company estimates that sales will increase by $43,000 during the coming year due to increased demand. By how much should net operating income increase?
1,620,000
1,420,000
Compute the degree of operating leverage at the current level of sales.(Round your answer to 2 decimal places.)
The president expects sales to increase by 16% next year. By how much should net operating income increase?(Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.)
Refer to the original data. Assume that the company sold 42,000 units last year. The sales manager is convinced that a 10% reduction in the selling price, combined with a $62,000 increase in advertising expenditures, would increase annual unit sales by 50%.
Prepare two contribution format income statements, one showing the results of last year
Stratford Company distributes a lightweight lawn chair that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $200,000 annually.
Explanation / Answer
If the lawn chair sells for $120 per unit, an increase in sales of $60,000 would mean an increase of 500 units (60,000/120). Variable expenses would also increase, at 500 units x $60.00 per unit, or $30,000. Fixed expenses don't change, so net operating income increases by $60,000 - $30,000 = $30,000.