New Product Development Accounting Project Math Problem

New Product Development write up Project - Math Problem ExampleOperating Profit $152,124,000$2,112.83*COMPUTATIONS FOR INCOME STATEMENTgross revenue= Total gross sales units * Total per unit sale= 72000 * 14,500= $1,044,000,000Total Variable Expenses = Variable cost per unit * Total sales units = 8,770.5* 72000= $631,476,000BREAK EVEN ANALYSISNumber of sales Units for train EvenBreak Even Sales Units = Fixed CostPrice - Variable Cost per unit =260,400,000 5729.5 =45,449 units.Sales Volume In Dollars for Break EvenTotal Sales =Total break even units * Total sales units=45,449 * 14,500=$659,010,500Profit if the Sales is 6000 Units Per MonthSales per year = 6000*12 = 72000 unitsProfit per month = $152,124,000Sales per month = 6000 unitsProfit per month = 152,124,000/ 12= $12,677,000Required 3Based on the contribution income statement, the operate leverage ratio and adjustment of safety are calculated belowOPERATING LEVERAGE RATIOThe formula to compute the operational leverage r atio isOperating Leverage = Contribution Margin/Net Income = $412,524,000/152,124,000 = 2.71Operating leverage indicates what kind in net income can be expected from a pitch in sales volume. An operating leverage of 2.7 implies that the change in net income testament be 2.7 multiplication as large as the change in sales volume. Therefore, for the projected profitability of wet crop Inc. that if sales increased by 10%, net income should increase by 27%. The net income of Water Play Inc. would be 2.7 clock greater than its sales volume.MARGIN OF SAFETYThe strand of safety is measured in either dollars or units. It measures... This would be a discretionary cost for the company as the cost on research and cultivation arises form management decision to spend a particular amount and management can swerve it in the short term if it is needed.The management can minimize this cost by delaying for short term, the unessential maintenance and repair expenses in the office. Reduction i n these costs does not cause an irreparable passing play to the companys operations.Operating leverage indicates what change in net income can be expected from a change in sales volume. An operating leverage of 2.7 implies that the change in net income will be 2.7 times as large as the change in sales volume. Therefore, for the projected profitability of Water Play Inc. that if sales increased by 10%, net income should increase by 27%. The net income of Water Play Inc. would be 2.7 times greater than its sales volume.Margin of safety reveals the amount by which existing sales can drop before a firm will incur Loss. The larger the margin the lesser the risk. (Sales can fall by a larger percentage before the company will show a loss.). The Margin of safety or Safety stock of Water Play Inc. is 26,551 units. It office that the company should maintain 26,551 units as safety stock in order to avoid the risk.