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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Tennessee Tonic makes a high-energy protein drink. The selling price per gallon is $7.20, and variable cost of production is $4.32. Total fixed cost per year is $316,600. The company is currently selling 125,000 gallons per year.
a. What is the margin of safety in gallons?
b. What is the degree of operating leverage?
c. If the company can increase sales in gallons by 30 percent, what percentage increase will it experience in income? Prove your answer using the income statement approach.
d. If the company increases advertising by $41,200, sales in gallons will increase by 15 percent. What will be the new break-even point? The new degree of operating leverage?
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