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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.

FINANCIAL ACCOUNTING
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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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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Calculate break-even sales for Erin Shelton, Incorporated. Break-Even Sales < Required 1 Required 5 Required 2 >
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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Calculate break-even sales for Erin Shelton, Incorporated. Break-Even Sales < Required 1 Required 5 Required 2 >
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