Niko's manufacturing Income Statement is presented in the next table ( units sold 750,000)
Per Unit Total
Sales $48.00 $36,000,000
Variable Costs
Direct Materials $14.00 $10,500,000.00
Direct Labor $10.00 $7,500,000.00
Factor Overhead $3.50 $2,625,000.00
Selling $1.50 $1,125,000.00
Total Variable Cost $21,750,000.00
Fixed Cost
Overhead $5.27 $3,950,000.00
Selling $4.67 $3,500,000.00
Administrative $6.53 $4,900,000.00
Total Fixed Costs $12,350,000.00
Pre Tax Income $1,900,000.00
Required
Calculate Contribution Margin per unit
Calculate Contribution Margin Ratio
Calculate Break Even Point in units
Calculate Break Even Point in $sales
What is the actual % margin of safety in units?
What is the actual % margin of safety in $sales?
Calculate actual Degree of Operating Leverage
If Niko’s pretax income goal is 9 million, how much units the company needs to sale
If Niko’s pretax income goal is 9 million, how much will be the $sales
A new technology will increase the operations’ efficiency. This new technique will reduce the direct material cost per unit by $1.00 and the direct labor cost by $.50, but will increase the fixed overhead cost by 1.5 million. The company is considering the implantation of this new technology.
Using this new data:
Calculate Contribution Margin per unit
Calculate Contribution Margin Ratio
Calculate Break Even Point in units
Calculate Break Even Point in $sales
Calculate Degree of Operating Leverage (with sales of 750,000 units)
Is the new technology a good decision?
How you explain the change in degree of operating leverage?