The following is Snow Corporation's contribution format income statement for last month: Sales $1,500,000 Less: variable expenses 800,000 Contribution margin 700,000 Less: fixed expenses 300,000 Operating income $400,000 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. How many units would the company have to sell to attain target operating income of $125,000? 4. What is the company's margin of safety in dollars?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The following is Snow Corporation's contribution format income statement for last month:
Sales
$1,500,000
Less: variable expenses
800,000
Contribution margin
700,000
Less: fixed expenses
300,000
Operating income
$400,000
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. How many units would the company have to sell to attain target operating income of
$125,000?
4. What is the company's margin of safety in dollars?
Transcribed Image Text:The following is Snow Corporation's contribution format income statement for last month: Sales $1,500,000 Less: variable expenses 800,000 Contribution margin 700,000 Less: fixed expenses 300,000 Operating income $400,000 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. How many units would the company have to sell to attain target operating income of $125,000? 4. What is the company's margin of safety in dollars?
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