Question

Berg Dry Cleaners has determined the following about its​ costs: Total variable expenses are $41,000​, total fixed expenses are $30,000, and the sales revenue needed to break even is $50,000.Determine the​ company's current​ 1) sales revenue and​ 2) operating income. ​(​Hint: First, find the contribution margin​ ratio; then prepare the contribution margin income​ statement.). Can you help me out by creating a contribution margin income statement to check if my answers are correct?

Answer 1

Break even point in sales dollar = Fixed expenses / Contribution margin ratio

$50,000 = $30,000 / Contribution margin ratio

Contribution margin ratio = $30,000 / $50,000

Contribution margin ratio = 60%

Variable expenses ratio = 100% - 60%

= 40%

Compant's current sales revenue = Total variable expenses / Variable expenses ratio

= $41,000 / 40%

= $102,500

Sales revenue	$102,500
(-) Variable expenses	$41,000
Contribution margin	$61,500
(-) Fixed expenses	$30,000
Operating income	$31,500