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eather Friends, Inc., distributes a high-quality wooden birdhouse that sells for \( \$ 120 \) per unit. Variable expenses are \( \$ 60.00 \) per unit, ind fixed expenses total \( \$ 180,000 \) per year. Its operating results for last year were as follows: Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine she break-even point in dollar sales: 3. If this years sales increase by \( \$ 46,000 \) and foxed expenses do not change, how much will net operating income increase? 4-a. What is the degree of operating leverage bosed on lasf year's sales? 4-b. Assume the president expects this year's sales to increase by \( 13 \% \) Using the degree of operating leverage from last year, what. percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced that a 14 reduction in the selling price, combined with a \( \$ 69,000 \) increase in advertising. would increase this year's unit sales by \( 25 \% \) : a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? b. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over fas year?

1) CM ratio = Contribution margin / sales x 100 = 1,560,000/3,120,000x100 = 50% 2) Break-even point in dollar sales = Fixed expenses / CM ratio = 180,000/50% = $360,000 3) Net oper

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