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 $1,164,000 Gross profit Selling and administrative expenses: Variable $400,000 750,000 Fixed 350,000 $414,000 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. 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 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: 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 $1,164,000 Gross profit Selling and administrative expenses: Variable $400,000 750,000 Fixed 350,000 $414,000 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. 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 contribution margin ratio to four decimal places. Round your final answer to the nearest dollar. (CMA adapted)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
$1,164,000
Gross profit
Selling and administrative expenses:
Variable
$400,000
750,000
Fixed
350,000
$414,000
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.
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
contribution margin ratio to four decimal places. Round your final answer to the nearest dollar. (CMA adapted)
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