I need the answer for 5 and 6



Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable expenses are $0 per
unit, and fixed expenses total $160,000 per year, Its operating results for last year were as follows:
Sales (10,000 units)
Variable expenses
Contribution margin
Fixed expenses
Operating income
$320,000
120,000
192,646
100,000
32,000
Required:
Answer each question independently based on the original data
1. What is the products CM ratio?
2. Use the CM ratio to determine the break-even point in sales dollars.
3. Assume this year's total sales increase by $55,000. If the fixed expenses do not change, how much will operating income increase?
Assume that the operating results for last year were as in the question data
4-a. Compute the degree of operating leverage based on last year's sales.
4-b. The president expects sales to increase by 15% next year. Using the degree of operating leverage from last year, what percentage
increase in operating income will the company realize this year? Calculate the dollar increase in operating income.
5. The sales manager is convinced that a 8% reduction in the selling price, combined with a $30,000 increase in advertising, would
Increase this year's unit sales by 30%
a. If the sales manager is right, what would be this year's operating income if his ideas are implemented?
b. If the sales manager's ideas are implemented, how much will operating income increase or decrease over last year?
6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1 per unit. He
thinks that this move, combined with some increase in advertising, would increase this year's unit sales by 30%. How much could the
president increase this year's advertising expense and still earn the same $32,000 operating income as last year?