Calendars imprints calendars with college names. The company hasfixed expenses of
$ 1 comma 065 comma 000$1,065,000
each month plus variable expenses of
$ 3.50$3.50
per carton of calendars. Of the variable? expense,
7575?%
is cost of goods?sold, while the remaining
2525?%
relates to variable operating expenses. The company sells eachcarton of calendars for
$ 13.50$13.50.
Read the
requirements
LOADING...
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Requirement 1. Compute the number of cartons ofcalendars that
College SpiritCollege Spirit
Calendars must sell each month to breakeven.??
Begin by determining the basic income statement equation.
Sales revenue | - | Variable expenses | - | | = | Operating income |
Using the basic income statement equation you determined abovesolve for the number of cartons to break even.
The breakeven sales is | | cartons. |
Requirement 2. Compute the dollar amount ofmonthly sales
College SpiritCollege Spirit
Calendars needs in order to earn
$ 304 comma 000$304,000
in operating income.??
Begin by determining the formula.
( | Fixed expenses | + | Target operating income | ) / | Contribution margin ratio | |
| = | Target sales in dollars |
?(Round the contribution margin ratio to two decimal?places.)
The monthly sales needed to earn $304,000 in operating income is$ | | . |
Requirement 3. Prepare the? company'scontribution margin income statement for June for sales of
460 comma 000460,000
cartons of calendars.
??
College Spirit |
Contribution Margin Income Statement |
Month Ended June 30 |
| Sales revenue | | | |
| Variable expenses: | | | |
| Cost of goods sold | | | |
| Operating expenses | | | |
| Contribution margin | | | |
| | | | |
| Operating income | | | |
Requirement 4. What is? June's margin ofsafety? (in dollars)? What is the operating leverage factor at thislevel of? sales?
Begin by determining the formula.
Sales revenue | - | Sales revenue at breakeven | |
| = | Margin of safety (in dollars) |
The margin of safety is $ | | . | |
| | | | | | | |
What is the operating leverage factor at this level of? sales?Begin by determining the formula.
Contribution margin | / | | = | Operating leverage factor |
?(Round the operating leverage factor to three decimal?places.)
The operating leverage factor is | | . |
Requirement 5. By what percentage willoperating income change if? July's sales volume is
1111?%
?higher? Prove your answer. ?(Round the percentage to twodecimal? places.)
If volume increases 11%, then operating income will increase | | %. |
Prove your answer. ?(Round the percentage to two decimal?places.)
Original volume (cartons) | | |
Add: Increase in volume | | |
New volume (cartons) | | |
Multiplied by: Unit contribution margin | | |
New total contribution margin | | |
Less: Fixed expenses | | |
New operating income | | |
vs. Operating income before change in volume | | |
Increase in operating income | | |
Percentage change | | % |
