Question

# Contribution Margin Ratio, Variable Cost Ratio, Break-Even Sales Revenue The controller of Ashton Company prepared the...

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?

• All working forms part of the answer
• Requirements
 A Contribution margin \$23,760 B Sales \$88,000 C = (A/B) x 100 Contribution margin ratio 27% Answer: requirement 1 A Contribution margin ratio 27% B = 100% - 27% Variable Cost ratio 73% Answer: requirement 2 A Total Fixed Cost \$9,180 B Contribution margin ratio 27% C = A/B Break Even Sales revenue \$34,000 Answer: requirement 3

>Requirement 4
Ashton can increase projected operating income (without increasing the total sales revenue) by:-
#1 decreasing variable cost per unit,
#2 decreasing total fixed cost

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