Sales Level 40000 Cases Total Fixed Costs Variable Costs Sel

Sales Level 40,000 Cases Total Fixed Costs Variable Costs Selling Price 110,000 S27/Case S30/Case is the expected profitloss for the period? Create an Inc Stmt using the full CM format (ignore taxes) Total Dollars UnirBasis Percentages SP VC CM FC NT 13. Based on the above Income Statement prepared, what is the current \"Operating Leverage\" and what dollar amount and percentage increase in profits would be expected with say a 20% increase in unit sales? Show your work and prepare a new CM income stmt (template) below to confirm (prove) your answer. 14. Considering the formula for \"Operating Leverage\", if no fixed costs had existed in the above fact pattern, operating leverage would have been (i.e. would always be): a. Negative b. Zero c. 1.0 d.> 2.0

Solution

12. Expected Profit And Loss for the period.

$ 2.75/cases

($ 110,000/40000 Cases)

13. Current Operating Leverage = CM/NI

= $ 120,000/$ 10,000

= 12

Expected Profit And Loss for the period. (If 20% increase in total sales that means sales is 48000/cases now)

$ 2.29/cases

($ 110,000/48000 Cases)

14.Considering thr formula for \"oprating Leverage\" if NO fixed costs had existed in the above fact pattern operating leverage would have been Option C i.e. 1.0

Because no fixed cost make NI = CM and will make operating leverage equals to 1.

	Unit Basis	Percentages	Total Dollars
SP	$ 30/Case	100%	$ 1,200,000
VC	$ 27/Case	90%	$ 1,080,000
CM (SP-VC)	$ 3/Case	10%	$ 120,000
FC	$ 2.75/cases ($ 110,000/40000 Cases)	9.17%	$ 110,000
NI	$ 0.25/cases	0.83%	$ 10,000