Question 5 The Year 5 contribution format income statement for ABC Company appears below: ABC Company Income Statement For the Year Ended December 31, Year 5 Sales (16,250 units) Variable Costs Contribution Margin Fixed Costs Net Loss $650,000 $260.000 $390,000 $460.000 -$70.000 Instructions answer the following independent questions and show computations to support your answers. A. How much additional sales revenue does it take to break even? B. ABC wishes to become profitable. They believe that a 25% reduction in variable costs can be achieved if fixed costs increase by $20,000. They also have a target net income of $60,000. Using the new cost structure, how many units will ABC need to sell in Year 3 to achieve their target? If you answer contains a partial unit, round up to the nearest whole unit.
Question 5 The Year 5 contribution format income statement for ABC Company appears below: ABC Company Income Statement For the Year Ended December 31, Year 5 Sales (16,250 units) Variable Costs Contribution Margin Fixed Costs Net Loss $650,000 $260.000 $390,000 $460.000 -$70.000 Instructions answer the following independent questions and show computations to support your answers. A. How much additional sales revenue does it take to break even? B. ABC wishes to become profitable. They believe that a 25% reduction in variable costs can be achieved if fixed costs increase by $20,000. They also have a target net income of $60,000. Using the new cost structure, how many units will ABC need to sell in Year 3 to achieve their target? If you answer contains a partial unit, round up to the nearest whole unit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Question 5
The Year 5 contribution format income statement for ABC Company appears below:
ABC Company
Income Statement.
For the Year Ended December 31, Year 5
Sales (16,250 units)
Variable Costs
Contribution Margin
Fixed Costs
Net Loss
$650,000
$260.000
$390,000
$460.000
-$70,000
Instructions
Answer the following independent questions and show computations to support your answers.
A. How much additional sales revenue does it take to break even?
B. ABC wishes to become profitable. They believe that a 25% reduction in variable costs can be achieved if
fixed costs increase by $20,000. They also have a target net income of $60,000.
Using the new cost structure, how many units will ABC need to sell in Year 3 to achieve their target? If your
answer contains a partial unit, round up to the nearest whole unit.
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