Question

Contribution Margin Concepts
The following information is taken from the 2017 records of Hendrix's Guitar Center.

		Fixed	Variable	Total
Sales				$1,350,000
Costs
Goods sold			607,500
Labor		$288,000	108,000
Supplies		3,600	9,000
Utilities		21,600	23,400
Rent		43,200	0
Advertising		10,800	44,100
Miscellaneous		10,800	18,000
Total costs		$378,000	$810,000	(1,188,000)
Net income				$ 162,000

Required

(a.) Determine the annual break-even dollar sales volume.

Contribution margin ratio:  Answer

Annual break-even dollar sales volumes: $Answer

(b.) Determine the current margin of safety in dollars.  
$Answer

(c.) What is the annual break-even dollar sales volume if management makes a decision that increases fixed costs by $55,000?

$Answer

Answer 1