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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Exercise 4-39 Break-Even Units, Contribution Margin Ratio, Multiple-Product Breakeven, Margin of Safety, Degree of Operating Leverage
Jellico Inc.’s projected operating income (based on sales of 450,000 units) for the coming year is as follows:
OBJECTIVE
Â
Total
Â
|
 |
Sales |
$11,700,000 |
|
Total variable cost |
8,190,000 |
|
|
Contribution margin |
$ Â 3,510,000 |
|
|
Total fixed cost |
2,254,200 |
|
|
Operating income |
$ Â 1,255,800 |
|
|
 Required: |
 |
 |
1.      Compute: (a) variable cost per unit, (b) contribution margin per unit, (c) contribution mar- gin ratio, (d) break-even point in units, and (e) break-even point in sales dollars.
2.      How many units must be sold to earn operating income of $296,400?
3.      Compute the additional operating income that Jellico would earn if sales were $50,000 more than expected.
4.      For the projected level of sales, compute the margin of safety in units, and then in sales dollars.
5.      Compute the degree of operating leverage. (Note: Round answer to two decimal places.)
6.       Compute the new operating income if sales are 10% higher than expected.
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