Chap. 3 Homework Assignment iSavedHelpSave & ExitSubmitCheck my work5!Required informationPart 2 of 2[The following information applies to the questions displayed below.]Warner Clothing is considering the introduction of a new baseball cap for sales by local vendors. The company hascollected the following price and cost characteristics.1.66pointsSales price15 per unit3 per unit42,000 per monthSkipped2$Variable costsFixed costsеВookAssume that the company plans to sell 5,000 units per month. Consider requirements (b), (c), and (d) independently of each other.PrintRequired:a. What will be the operating profit?b. What is the impact on operating profit if the sales price decreases by 10 percent? Increases by 20 percent?c. What is the impact on operating profit if variable costs per unit decrease by 10 percent? Increase by 20 percent?d. Suppose that fixed costs for the year are 10 percent lower than projected, and variable costs per unit are 10 percent higher thanprojected. What impact will these cost changes have on operating profit for the year? Will profit go up? Down? By how much?References

a) Operating profit: An operating profit is the profit from business operations( gross profit -…

Answered: Required: a. What will be the operating…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which of the following would produce no change in the contribution margin per unit? Select one: a. A 14% increase in variable cost. b.A 7% increase in selling price. CA 15% decrease in selling price. d. None of the given of answers. A 23% increase in the number of units sold.
1-Due to an increase in labor rates, the company estimates that variable expenses will increase by $3 per ball next year. If this change takes place and the selling price per ball remains constant at $25, what will be the new CM ratio and break-even point in balls? 2. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $90,000, as last year? 3. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year, what selling price per ball must it charge next year to cover the increased labor costs?
Calculate the information below and use income statement A) PV ratio B)profit when sales are 20000 C)New BE point if selling price is reduced 20% Fixed cost 4000 Break even point 10000
3) If demand for 2022 is instead 2,500 units should the company pay to increase their capacity? Why? Please explain your calculations and reference to the chart in Figure 1. Assume units are sold at the normal price. Please mention the concept of incremental profits. Hint: If you expand capacity, you will have to pay additional fixed costs of $25,000. Remember that fixed costs are fixed within the relevant range. If you expand capacity then you are outside this range. If you expand capacity then you can make revenue on 500 additional units at the normal price and would pay variable costs on 500 additional units. Please consider the incremental profit or loss of expanding capacity. The incremental profit is the increase in revenues minus the increase in costs of adding 500 more units. If the incremental profit of expanding capacity is positive then you should do so.
I Question 3: Sohar Company's financial information is given in the table below. Sales (OMR) Fixed Costs 405000 450000 Year Variable Costs 2019 225000 2020 120000 240000 Calculate: a) PV ratio, b) B.E.P. c) Sales required to earn a profit of OMR 40000. d) Margin of safety at a profit of OMR 50000 e) Profit when sales are OMR. 200000.
What is AAA Corp.’s projected degree of operating leverage based on the projected sales?

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