Erin Shelton, Incorporated, wants to earn a target profit of $820,000 this year. The company's fixed costs are expected to be $1,040,000 and its variable costs are expected to be 50 percent of sales. Erin Shelton, Incorporated, earned $720,000 in profit last year. Required: 1. Calculate break-even sales for Erin Shelton, Incorporated. 2. Prepare a contribution margin income statement on the basis of break-even sales. 3. Calculate the required sales to meet the target profit of $820,000.
Erin Shelton, Incorporated, wants to earn a target profit of $820,000 this year. The company's fixed costs are expected to be $1,040,000 and its variable costs are expected to be 50 percent of sales. Erin Shelton, Incorporated, earned $720,000 in profit last year. Required: 1. Calculate break-even sales for Erin Shelton, Incorporated. 2. Prepare a contribution margin income statement on the basis of break-even sales. 3. Calculate the required sales to meet the target profit of $820,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Erin Shelton, Incorporated, wants to earn a target profit of $820,000 this year. The company's fixed costs are expected to be
$1,040,000 and its variable costs are expected to be 50 percent of sales. Erin Shelton, Incorporated, earned $720,000 in profit last
year.
Required:
1. Calculate break-even sales for Erin Shelton, Incorporated.
2. Prepare a contribution margin income statement on the basis of break-even sales.
3. Calculate the required sales to meet the target profit of $820,000.
4. Prepare a contribution margin income statement based on sales required to earn a target profit of $820,000.
5. When the company earns $820,000 of net income, what is its margin of safety and margin of safety as a percentage of sales?
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Required 1 Required 2 Required 3 Required 4
Calculate break-even sales for Erin Shelton, Incorporated.
Break-Even Sales
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