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The following is Arkadia Corporation's contribution format income statement for last
month:
Sales
$1,200,000
Less: variable expenses
800,000
Contribution margin
400,000
Less: fixed expenses
300,000
Operating income
$100,000
The company has no beginning or ending inventories and produced and sold 20,000
units during the month.
Required:
a) What is the company's contribution margin ratio?
b) What is the company's break-even in units?
c) If sales increase by 100 units, by how much should operating income increase?
d) How many units would the company have to sell to attain target operating income
of $125,000?
e) What is the company's margin of safety in dollars?
f) What is the company's degree of operating leverage?
g) If the tax rate is 30%, how many units must be sold to attain an after tax profit of
$84,000?
The following monthly budgeted data are available for the International Company:
Product A
Product B
Product C
Sales
$500,000
$300,000
$900,000
Variable expenses
300,000
210,000
720,000
Contribution margin
$200,000
$90,000
$180,000
Budgeted operating income for the month is $220,000.
Required:
a) Calculate the break-even sales for the month.
b) Calculate the margin of safety.
c) Calculate the degree of operating leverage.
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