Break-Even in Sales Revenue, Changes in Variables
Carmichael Corporation is in the process of preparing next year’s budget. The pro forma income statement for the current year is as follows:
Sales | $1,800,000 | |||
Cost of sales: | ||||
Direct materials | $250,000 | |||
Direct labor | 180,000 | |||
Variable overhead | 106,000 | |||
Fixed overhead | 100,000 | 636,000 | ||
Gross profit | $1,164,000 | |||
Selling and administrative expenses: | ||||
Variable | $400,000 | |||
Fixed | 350,000 | 750,000 | ||
Operating income | $414,000 |
Required:
1. What is the break-even sales revenue for
Carmichael Corporation for the current year? In your calculations,
carry the contribution margin ratio to two decimal places.
$
2. For the coming year, the management of
Carmichael Corporation anticipates an 8 percent increase in
variable costs and a $60,000 increase in fixed expenses. What is
the break-even point in dollars for next year? In your computation,
round the contribution margin ratio to four decimal places. Round
your final answer to the nearest dollar. (CMA
adapted)
$
Break-Even in Sales Revenue, Changes in Variables Carmichael Corporation is in the process of preparing next...
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