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break even in units target income new unit variable cost degree of operating leverag 4142670

Break-Even in Units, Target Income, New Unit Variable Cost, Degree of Operating Leverage, Percent Change in Operating Income Reagan, Inc., has developed a chew-proof dog bed — the Tuff-Pup. Fixed costs are $204,400 per year. The average price for the Tuff-Pup is $36, and the average variable cost is $22 per unit. Currently, Reagan produces and sells 20,000 Tuff-Pups annually. Required: 1. How many Tuff-Pups must be sold to break even?2. If Reagan wants to earn $95,900 in pro ? t, how many Tuff-Pups must be sold? Prepare avariable-costing income statement to verify your answer.3. Suppose that Reagan would like to lower the break-even units to 12,000. The company does not believe that the price or ? xed cost can be changed. Calculate the new unit variable cost that would result in break-even units of 12,000. (Round to the nearest cent.)4. What is Reagan ’ s current contribution margin and operating income? Calculate the degree of operating leverage (round your answer to four decimal places). If sales increased by 10percent next year, what would the percent change in operating income be? What would the new total operating income for next year be?

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