Question

Contribution Margin Ratio, Variable Cost Ratio, Break-Even Sales Revenue

The controller of Sandoval Company prepared the following projected income statement:

Sales | $90,000 |

Total Variable cost | 79,000 |

Contribution margin | $11,000 |

Total Fixed cost | 6,500 |

Operating income | $4,500 |

**Required:**

**1.** Calculate the contribution margin ratio.
Round your answer to the nearest whole number.

%

**2.** Calculate the variable cost ratio. Round
your answer to the nearest whole number.

%

**3.** Calculate the break-even sales revenue for
Sandoval. If required, round your answer to nearest dollar.

$

Answer #1

**given data**

**sales = $ 90000**

**variable cost = $ 79000**

**contribution margin = $ 11000**

**total fixed cost = $ 6500**

**operating income = $ 4500**

**1) calculate
the contribution margin ratio :**

contribution margin ratio = contribution margin /
sales |

**= (11000 / 90000) * 100**

**contribution margin ratio = 12%
(approxmately)**

**2) calculate
the variable cost ratio :**

variable cost ratio = variable cost /
sales |

**= (79000 / 90000) * 100**

**variable cost ratio = 88% (approxmately)**

**3) calculate
the break even sales revenue :**

break even sales = total fixed cost / contribution
margin ratio |

**= 6500 / 12%**

**break even sales revenue = $ 53182
(approxmately)**

**(please note that the intermediate calculations have not
been rounded off)**

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Total Variable cost
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Contribution
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Total Fixed cost
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Operating income
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