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 |

Berg Dry Cleaners has determined the following about its costs:
Total variable expenses are $40,000; total fixed expenses are
$30,000, and the sales revenue needed to break even is $40,000. Use
the contribution margin income statement and the shortcut
contribution margin approaches to determine Berg Dry Cleaners’
current (1) sales revenue and (2) operating income. (Hint: First
find the contribution margin ratio; then prepare the contribution
margin income statement.)

Sales
$60,000
Less: Variable Expenses
45,000
Contribution Margin
15,000
Less: Fixed Expenses
18,000
Net Income
-$3,000
a. What are the total sales in dollars at the break-even
point?
b. What are the total variable expenses at the break-even
point?
c. What is the company's contribution margin ratio?
d. If unit sales were increased by 10% and fixed expenses were
reduced by $2,000, what would be the company's expected net income?
(Prepare a new income statement.)

Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
316,000
$
20
Variable
expenses
221,200
14
Contribution
margin
94,800
$
6
Fixed
expenses
78,000
Net operating
income
$
16,800
Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
Break Even Point in unit sales
Break
Even Point in dollar sales
2. Without resorting to computations, what is the total
contribution margin at...

Sales
$
61,500
Cost of goods
sold
52,400
Gross
profit
$
9,100
operating expenses $15,700
operating loss $6600
a. Rearrange the preceding income statement to
the contribution margin format.
Based on an analysis of cost behavior patterns, it has been
determined that the company's contribution margin ratio is 17%.
0
$0
b. If sales increase by 15%, what will be the
firm's operating income (or loss)? (Do not round
intermediate calculations.)c. Calculate
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Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
302,000
$
20
Variable expenses
211,400
14
Contribution margin
90,600
$
6
Fixed expenses
73,200
Net operating income
$
17,400
Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
2. Without resorting to computations, what is the total
contribution margin at the break-even point?
3-a. How many units would have to be sold each...

Contribution Margin Ratio, Variable Cost Ratio, Break-Even Sales
Revenue
The controller of Ashton Company prepared the following
projected income statement:
Sales
$88,000
Total Variable cost
64,240
Contribution
margin
$23,760
Total Fixed cost
9,180
Operating income
$14,580
Required:
1. Calculate the contribution margin
ratio.
%
2. Calculate the variable cost ratio.
%
3. Calculate the break-even sales revenue for
Ashton.
$
4. How could Ashton increase projected
operating income without increasing the total sales revenue?

Spencer Company's most recent monthly
contribution format income statement is given below:
Sales..................................
$60,000
Variable expenses.............
45,000
Contribution margin..........
15,000
Fixed expenses..................
18,000
Net operating loss..............
($3,000)
The company sells its only product for $10 per unit. There were no
beginning or ending inventories.
Required:
What are total sales in dollars at the break-even point?
What are total variable expenses at the break-even point?
What is the company's contribution margin ratio?
d. If unit sales...

Lucido Products markets two computer games: Claimjumper and
Makeover. A contribution format income statement for a recent month
for the two games appears below:
Claimjumper
Makeover
Total
Sales
$
100,000
$
50,000
$
150,000
Variable expenses
37,000
8,000
45,000
Contribution margin
$
63,000
$
42,000
105,000
Fixed expenses
77,910
Net operating income
$
27,090
Required:
1. What is the overall contribution margin (CM) ratio for the
company?
2. What is the company's overall break-even point in dollar
sales?
3. Prepare...

Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
310,000
$
20
Variable expenses
217,000
14
Contribution margin
93,000
$
6
Fixed expenses
73,200
Net operating income
$
19,800
Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
2. Without resorting to computations, what is the total
contribution margin at the break-even point?
3-a. How many units would have to be sold each...

Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
604,000
$
40
Variable expenses
422,800
28
Contribution margin
181,200
$
12
Fixed expenses
154,800
Net operating income
$
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Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
2. Without resorting to computations, what is the total
contribution margin at the break-even point?
3-a. How many units would have to be sold each...

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