McKnight Company sells flags with team logos. McKnight has fixed costs of $264,000 per year plus variable costs of $13.20 per flag. Each flag sells for $22.00. Requirement 1. Use the equation approach to compute the number of flags McKnight must sell each year to break even. Requirement 2. Use the contribution margin ratio approach to compute the dollar sales McKnight needs to earn $17,600 in operating income for 2018. (Round the contribution margin ratio to two decimal places.) Requirement 3. Prepare McKnight's contribution margin income statement for the year ended December 31, 2018, for sales of 25,000 flags. (Round your final answers up to the next whole number.) (Use parentheses or a minus sign for an operating loss.)
McKnight Company sells flags with team logos. McKnight has fixed costs of $264,000 per year plus variable costs of $13.20 per flag. Each flag sells for $22.00. Requirement 1. Use the equation approach to compute the number of flags McKnight must sell each year to break even. Requirement 2. Use the contribution margin ratio approach to compute the dollar sales McKnight needs to earn $17,600 in operating income for 2018. (Round the contribution margin ratio to two decimal places.) Requirement 3. Prepare McKnight's contribution margin income statement for the year ended December 31, 2018, for sales of 25,000 flags. (Round your final answers up to the next whole number.) (Use parentheses or a minus sign for an operating loss.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:McKnight Company sells flags with team logos. McKnight has fixed costs of $264,000 per year plus
variable costs of $13.20 per flag. Each flag sells for $22.00.
Requirement 1. Use the equation approach to compute the number of flags McKnight must sell each
year to break even.
Requirement 2. Use the contribution margin ratio approach to compute the dollar sales McKnight needs
to earn $17,600 in operating income for 2018. (Round the contribution margin ratio to two decimal
places.)
Requirement 3. Prepare McKnight's contribution margin income statement for the year ended December
31, 2018, for sales of 25,000 flags. (Round your final answers up to the next whole number.) (Use
parentheses or a minus sign for an operating loss.)
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