Question - Aldovar Company produces a variety of chemical. One division makes reagents for laboratories. The division's division projected income statement for the coming year is:
Sales (203,000 units @ $70) $14,210,000
Total variable cost 8,120,000
Contribution margin 6,090,000
Total fixed cost 4,945,500
Operating income 1,144,500
1. Compute the contribution margin unit, and calculate the break-even point in units (notes: round answer to the nearest unit.) Calculate the contribution margin ratio and the break-even sales revenue to the nearest dollars.
2. The divisional manager has decided to increase the adverting budget by $250,000. This will increase sales revenue by $1 million. By how much will operating income increase or decrease as a result of this action?
3. Suppose sales revenue exceed the estimated amount on the income statement by $1,500,000.
Without preparing a new income statement, by how much are profits underestimated?
4. Compute the margarine of safety based on the ordinary income statement.
5. Compute the degree of operations Leverage a on the ordinary statement. It revenue or 8% greater than expected, what is the percentage increase in operating income? (note: round operating leverage to two decimal places.)