Sales minus fixed costFixed cost minus variable costSales minus variable cost minus fixed costSales minus variable cost
Atlas Corporation sells 100 bicycles during a month. The contribution margin per bicycle is $200. The monthly fixed expenses are $8,000. Compute the profit from the sale of 100 bicycles.
You are watching: The degree of operating leverage quizlet
Atlas Corporation sells 100 bicycles during a month at a price of $500 per unit. The variable expenses amount to $300 per bicycle. How much does profit increase if it sells one more bicycle?
Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold.
total profits equal total coststotal profits exceed total coststotal revenue equals total coststotal sales equal projectionsBreak-even point is the level of sales at which total revenue equals total costs and the profit is zero.
If sales are zero, the company”s loss will equal its fixed expenses. Each unit that is sold reduces the loss by the amount of the unit contribution margin. Once the break-even point has been reached, each additional unit sold increases the company”s profit by the amount of the unit contribution margin.
Team Corporation has sales of $1 million, fixed expenses of $200,000, and variable expenses of $650,000 for the month of March. What is the contribution margin ratio of the company for the month of March?
Base Corporation has sales of $100,000, variable costs of $40,000, and fixed costs of $30,000 currently. The company is expecting a $36,000 increase in sales. What is the change in contribution margin for the company?
If sales increase by $50,000, what will be the net operating income for the company?Sales: $100,000VC: $50,000CM: $50,000FC: $20,000NOI: $30,000
$25,000$55,000$15,000$50,00050% CM * $50,000 increase= $25,000 change in CMnew CM=$50,000+$25,000=$75,00075,000-$20,000=NOI
The CM ratio shows how the contribution margin will be affected by a change in total sales. The impact on net operating income of any given dollar change in total sales can be computed by applying the CM ratio to the dollar change.
Cartier Corporation currently sells its products for $50 per unit. The company”s variable costs are $20 per unit. Fixed expenses amount to a total of $5,000 per month. What is the company”s variable cost ratio?
Alpha Corporation is currently selling 500 skateboards per month. The unit selling price and variable expenses are $60 and $35 respectively. The fixed expenses amount to $5,000 per month. The company has an opportunity to make a bulk sale of 100 skateboards. This sale will not affect the company”s regular sales or total fixed expenses. What unit price should be charged if the company is seeking a profit of $2,000 on the bulk sale?
Unit price= Variable cost per skateboard + Desired profit per skateboard = $35 + ($2,000/100) = $55.
Assume the company is considering a reduction in the selling price by $10 per unit and an increase in advertising budget by $5,000. This will increase sales volume by 50%.What is the net operating income after the changes?Selling Price: $110,000 Total $110 per unitVC: 60,000 Total 60 per unitCM: 50,000 ; 50FC 30,000NOI: $20,000#of units: 1000
New selling price = $110 – $10 = $100. New sales level = 1,000 units x 150% = 1,500 units. Net operating income = Sales of $150,000 (or 1,500 units × Selling price of $100 per unit) – Variable expenses of $90,000 (or 1,500 units × variable expense of $60 per unit) – Fixed expenses of $35,000 (or $30,000 + $5,000) = $25,0000*.
the variable cost ratio is the ratio of variable expenses to sales. The effect of changes in variable costs, fixed costs, selling price, and volume can be computed on an incremental basis or on a total basis. CVP concepts can be applied to study the impact of changes in variable costs, fixed costs, selling price, and sales volume. CVP concepts can also be used to determine the selling price the company can quote on special orders.
Frank Corporation has a single product. Its selling price is $80 and the variable costs are $30. The company”s fixed expenses are $5,000. What is the company”s break-even point in unit sales?
Future Corporation has a single product; the product selling price is $100 and variable costs are $60. The company”s fixed expenses are $10,000. What is the company”s break-even point in sales dollars?