Question

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%.

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b. If sales increase by 15%, what will be the firm's operating income (or loss)? (Do not round intermediate calculations.)c. Calculate the amount of revenue required for Big Shot, Inc., to break-even.

c. Calculate the amount of revenue required for Big Shot, Inc., to break-even.

Answer 1

Answer:

a)Rearrange the preceding income statement to the contribution margin format.	$	$
Sales		6150
Variable expenses	61500-10455	51045
Contribution margin	61500*17%	10455
Fixed expenses	10455-(-6600)	17055
Operating loss		-6600
b)If sales increase by 15%, what will be the firm's operating income (or loss)
CM ratio	10455 / 61500	17%
b)Firms operating loss	-6600+(61500*15%*17%)	-5031
c) Calculate the amount of revenue required for Big Shot, Inc., to break-even.
Break even	17055 / 17%	100323