Computing breakeven sales and operating income or loss under different conditionsGilbert’s Steel Parts produces parts for the automobile industry. The company has monthly fixed costs of $640,220 and a contribution margin of 85% of revenues.RequirementsCompute Gilbert’s monthly breakeven sales in dollars. Use the contribution margin ratio approach.Use contribution margin income statements to compute Gilbert’s monthly operating income or operating loss if revenues are $500,000 and if they are $1,050,000.Do the results in Requirement 2 make sense given the breakeven sales you computed in Requirement 1? Explain.

Break-even Point: It refers to a point in the level of operations at which a company experiences its…

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FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Computing breakeven sales and operating income or loss under different conditions

Gilbert’s Steel Parts produces parts for the automobile industry. The company has monthly fixed costs of $640,220 and a contribution margin of 85% of revenues.

Requirements

Compute Gilbert’s monthly breakeven sales in dollars. Use the contribution margin ratio approach.
Use contribution margin income statements to compute Gilbert’s monthly operating income or operating loss if revenues are $500,000 and if they are $1,050,000.
Do the results in Requirement 2 make sense given the breakeven sales you computed in Requirement 1? Explain.

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