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  3. 4. products markets two computer games: predator a

4. Products markets two computer games: Predator and Adapter. A contribution format income statement for...

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Accounting

4. Products markets two computer games: Predator and Adapter. A contribution format income statement for a recent month for the two games appears below: Sales . . . . . . . . . . . . . . . . . . . . . . . .. $100,000 Variable expenses . . . . . . . . . . . . . . .. 25,000 Fixed expenses . . . . . . . . . . . . . . . . . . 90,000 Tax rate ... 30%

a. Compute the company CM ratio and variable expenses ratio.

b. Compute the company Breakeven point in both units and sales dollar. Use the equation method.

c. Assume that sales increases by $400,00 next year. If cost behavior pattern remains unchanged, by how much will the company net operating income increases? Use the CM ratio to compute your answer.

d. Refer to the original data. assume that next year management wants the company to earn a profit of at least $30000. How many units will have to be sold to meet this target profit?

e. Establish the relationship between the leverage and operating profitability of the firms with derivation.

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