Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger

Exercise 39

Break-Even Units, Contribution Margin Ratio, Multiple-Product Breakeven, Margin of Safety, Degree of Operating Leverage
Jellico Inc.'s projected operating income (based on sales of 450,000 units) for the coming year is as follows:

Required:
1. Compute: (a) variable cost per unit, (b) contribution margin per unit, (c) contribution margin ratio, (d) break-even point in units, and (e) break-even point in sales dollars.
2. How many units must be sold to earn operating income of $296,400?
3. Compute the additional operating income that Jellico would earn if sales were $50,000 more than expected.
4. For the projected level of sales, compute the margin of safety in units, and then in sales dollars.
5. Compute the degree of operating leverage. ( Note : Round answer to two decimal places.)
6. Compute the new operating income if sales are 10% higher than expected.