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Question 4.4                                                                                                                       The following is Silver Corporation's contribution format income statement for last month:  Sales $1,400,000 Less: variable expenses 800,000 Contribution margin 600,000 Less: fixed expenses 400,000 Operating income $200,000 The company has no beginning or ending inventories and produced and sold 20,000 units during the month. Required: What is the company's contribution margin ratio? What is the company's break-even in units? If sales increase by 100 units, by how much should operating income increase? How many units would the company have to sell to attain target operating income of $225,000? What is the company's margin of safety in dollars? What is the company's degree of operating leverage?

Question 4.4                                                                                                                       The following is Silver Corporation's contribution format income statement for last month:  Sales $1,400,000 Less: variable expenses 800,000 Contribution margin 600,000 Less: fixed expenses 400,000 Operating income $200,000 The company has no beginning or ending inventories and produced and sold 20,000 units during the month. Required: What is the company's contribution margin ratio? What is the company's break-even in units? If sales increase by 100 units, by how much should operating income increase? How many units would the company have to sell to attain target operating income of $225,000? What is the company's margin of safety in dollars? What is the company's degree of operating leverage?

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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Question 4.4                                                                                                                      

The following is Silver Corporation's contribution format income statement for last month:
 

Sales

$1,400,000

Less: variable expenses

800,000

Contribution margin

600,000

Less: fixed expenses

400,000

Operating income

$200,000


The company has no beginning or ending inventories and produced and sold 20,000 units during the month.


Required:

  1. What is the company's contribution margin ratio?
  2. What is the company's break-even in units?
  3. If sales increase by 100 units, by how much should operating income increase?
  4. How many units would the company have to sell to attain target operating income of $225,000?
  5. What is the company's margin of safety in dollars?
  6. What is the company's degree of operating leverage?

 

 

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