Question

Contribution Margin Concepts The following information is taken from the 2017 records of Hendrix's Guitar Center. Fixed Variable Total Sales $1,350,000 Costs Goods sold 607,500 Labor $288,000 108,000 Supplies 3,600 9,000 Utilities 21,600 23,400 Rent 43,200 0 Advertising 10,800 44,100 Miscellaneous 10,800 18,000 Total costs $378,000 $810,000 (1,188,000) Net income $ 162,000 Required (a.) Determine the annual break-even dollar sales volume. Contribution margin ratio: Answer Annual break-even dollar sales volumes: $ Answer (b.) Determine the current margin of safety in dollars. $ Answer (c.) Prepare a cost-volume-profit graph for the guitar shop. Label both axes in dollars with maximum values of $1,000,000. Draw a vertical line on the graph for the current ($750,000) sales level, and label total variable costs, total fixed costs, and total profits at $75,000 sales. (d.) What is the annual break-even dollar sales volume if management makes a decision that increases fixed costs by $55,000?

Answer 1