Break-Even in Sales Revenue, Changes in Variables Carmichael Corporation is in the process of preparing next year's budget. The pro forma income statement for the current year is as follows: $1,800,000 Sales Cost of sales: Direct materials Direct labor Variable overhead Fixed overhead Gross profit Selling and administrative expenses: $250,000 180,000 106,000 100,000 $400,000 350,000 636,000 $1,164,000 Variable Fixed Operating income Required: 1. What is the break-even sales revenue for Carmichael Corporation for the current year? In your calculations, carry the contribution margin ratio to two decimal places. $937,500 750,000 $414,000 2. For the coming year, the management of Carmichael Corporation anticipates an 8 percent increase in variable costs and a $60,000 increase in fixed expenses. What is the break-even point in dollars for next year? In your comput round the contribution margin ratio to four decimal places. Round your final answer to the nearest dollar. (CMA adapted)

Break-Even in Sales Revenue, Changes in Variables Carmichael Corporation is in the process of preparing next year's budget. The pro forma income statement for the current year is as follows: $1,800,000 Sales Cost of sales: Direct materials Direct labor Variable overhead Fixed overhead Gross profit Selling and administrative expenses: $250,000 180,000 106,000 100,000 $400,000 350,000 636,000 $1,164,000 Variable Fixed Operating income Required: 1. What is the break-even sales revenue for Carmichael Corporation for the current year? In your calculations, carry the contribution margin ratio to two decimal places. $937,500 750,000 $414,000 2. For the coming year, the management of Carmichael Corporation anticipates an 8 percent increase in variable costs and a $60,000 increase in fixed expenses. What is the break-even point in dollars for next year? In your comput round the contribution margin ratio to four decimal places. Round your final answer to the nearest dollar. (CMA adapted)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Sales Revenue Approach, Variable Cost Ratio, Contribution MarginRatioArberg Company’s controller prepared the following budgeted income statement for thecoming year: Required:1. What is Arberg’s variable cost ratio? What is its contribution margin ratio?2. Suppose Arberg’s actual revenues are $30,000 more than budgeted. By how much willoperating income increase? Give the answer without preparing a new income statement.3. How much sales revenue must Arberg earn to break even? Prepare a contribution marginincome statement to verify the accuracy of your answer.4. What is Arberg’s expected margin of safety?5. What is Arberg’s margin of safety if sales revenue is $380,000?
Budgeted Selling and Administrative Expenses Salary Expense Sales Commissions 5% of Sales Insurance Expense Rent Depreciation on equipment Utilities Total Operating Expenses Schedule of Cash Payments for Selling and Administrative Expenses Salary Expense 100% of Prior Month Sales Commissions Insurance Expense October November December Multiple Choice 30,000 30,500 15,000 15,500 12,000 12,000 14,400 14,400 16,500 16,500 2,100 2,300 90,000 91, 200 ? 15,100 12,000 ? 2,200 ? 30,500 ? 12,000 ? ? ? Rent 100% of Prior Months Utilities Expense Total Payments for Selling and Administrative Expenses The amount of cash paid for Selling and Administrative expenses during the month of November is: 31,000 15,300 12,000 14,400 16,500 2,500 91,700 ? ? 12,000 14,400 ?
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Break-Even in Sales Revenue, Changes in Variables Carmichael Corporation is in the process of preparing next year's budget. The pro forma income statement for the current year is as follows: Sales $1,800,000 Cost of sales: Direct materials $250,000 Direct labor 180,000 Variable overhead 106,000 Fixed overhead 100,000 636,000 Gross profit $1,164,000 Selling and administrative expenses: Variable $400,000 Fixed 350,000 750,000 Operating income $414,000 Required: 1. What is the break-even sales revenue for Carmichael Corporation for the current year? In your calculations, carry the contribution margin ratio to two decimal places.$937500 2. For the coming year, the management of Carmichael Corporation anticipates an 8 percent increase in variable costs and a $60,000 increase in fixed expenses. What is the break-even point in dollars for next year? In your computation, round the…
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