The Excel worksheet form that appears on the next page is to be used to recreate portions of the Review Problem on pages 208–210. Download the workbook containing this form from the Online Learning Center at www.mhhe.com/garrison14e. On the website you will also receive instructions about how to use this worksheet form.
You should proceed to the requirements below only after completing your worksheet.
1. Check your worksheet by changing the fixed expenses to $270,000. If your worksheet is oper- ating properly, the degree of operating leverage should be 10. If you do not get this answer, find the errors in your worksheet and correct them. How much is the margin of safety percent- age? Did it change? Why or why not?
2. Enter the following data from a different company into your worksheet:
What is the margin of safety percentage? What is the degree of operating leverage?
3. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 15%.
4. Confirm the calculations you made in part (3) above by increasing the unit sales in your work- sheet by 15%. What is the new net operating income and by what percentage did it increase?
5. Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930s. The retro-look cycle would be sold for $10,000 and at that price, Thad estimates 600 units would be sold each year. The vari- able cost to produce and sell the cycles would be $7,500 per unit. The annual fixed cost would be $1,200,000.
a. What would be the break-even unit sales, the margin of safety in dollars, and the degree of operating leverage?
b. Thad is worried about the selling price. Rumors are circulating that other retro brands of cycles may be revived. If so, the selling price for the Western Hombre would have to be reduced to $9,000 to compete effectively. In that event, Thad would also reduce fixed expenses by $300,000 by reducing advertising expenses, but he still hopes to sell 600 units per year. Do you think this is a good plan? Explain. Also, explain the degree of operating leverage that appears on your worksheet.
All else constant, an increase in the incomes of consumers in the market for diamonds would cause the supply of diamonds to increase.77) Assume that in an effort to help ...Dec 07 2019
To obtain optimal yield, populations should be harvested at what part of the sigmoid growth curve? (A) The very beginning (B) The steep part (C) Where it levels off...Mar 19 2018
The ShireLodge provides a residential convention service in England's Yorkshire Dales. The lodge's general manager is concerned about cash flow in the next few months par...Apr 08 2021
The accompanying data (1.00-cm cells) were obtained for the spectrophotometric titration of 10.00 mL of Pd(II) with 2.44 x 10-4 M Nitroso R (0.W. Rollins and M. Oldham. A...Jun 23 2020
To start of this week’s discussion, we will step back a little bit and consider the impact of different economic schools of thought and how they impact policy making So, ...Mar 19 2020
Learning Objective 2: Isue bonds payable (discount); record interest payments and the related bond amortization using the effective-interest method) Hadley Ltd. is author...Mar 18 2020
An industrial-fan system, a model of which is shown in Figure E8.23, is found to experience undesirable vibrations when operated at 600 rpm. It is assessed that these und...Jun 25 2020
Bavarian Brew is planning on acquiring Bavarian Sausage in a pure exchange merger. Bavarian Brew’s stock is currently trading at $35 and they set the exchange ratio at 0....Feb 13 2020
Exactly three years ago, you purchased a $1,000 face value bond for $1,211.16. The coupon rate was 6.5 percent with interest paid semiannually. Today, you sold that bond ...May 19 2018
Production of pressure vessels is fastening an operkended cylinder and two rigid plates with boks. The cylinder made of Wass. The plates are attached with four W 7/16. st...Jun 02 2020