Chapter 5 Solutions Manual Content
5-1
Chapter 5: Applying Excel
The completed worksheet is shown below.
Chapter 5 Solutions Manual Content
5-2
Chapter 5: Applying Excel (continued)
The completed worksheet, with formulas displayed, is shown below.
Chapter 5 Solutions Manual Content
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Chapter 5: Applying Excel (continued)
1. When the fixed expenses are changed to $270,000, the worksheet
changes as shown below:
Chapter 5 Solutions Manual Content
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Chapter 5: Applying Excel (continued)
2. With the changes in the data, the worksheet should look like this:
The margin of safety percentage is 13% and the degree of operating
leverage is 8.
Chapter 5 Solutions Manual Content
5-5
Chapter 5: Applying Excel (continued)
3. The degree of operating leverage can be used to estimate the expected
percentage increase in net operating income from a 15% increase in
Chapter 5 Solutions Manual Content
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Chapter 5: Applying Excel (continued)
4. Increasing the unit sales by 15% results in net operating income of
$132,000—an increase of 120% over the previous net operating income
of $60,000.
Chapter 5 Solutions Manual Content
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Chapter 5: Applying Excel (continued)
5. a. The initial plan for the Western Hombre motorcycle is summarized
below:
Chapter 5 Solutions Manual Content
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Chapter 5: Applying Excel (continued)
5. b. The modified plan for the Western Hombre motorcycle is summarized
below:
Chapter 5 Solutions Manual Content
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Chapter 5: Applying Excel (continued)
This does not appear to be a good plan. At best, Thad would only
break even—and that assumes that 600 units would still be sold