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9. Xavier Medical Supply is a retailer of home medical equipment. Last year, Xaviers sales revenues totaled $6,000,000. Tota

1. What is Xaviers current operating income? 2. What is Xaviers contribution margin ratio? 3. What is the companys breakev

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Answer #1
Requirement 1. Xavier's current operating income
sales revenue - Fixed expenses - variable Expenses = Operating income
6000000 - 600000 - 1500000 = 3900000
Requirement 2. Xavier's contribution margin ratio
Contribution margin ÷ sales =
4500000 ÷ 6000000 = 0.75
The contribution margin ratio is = 75 %
sales - variable cost = Contribution margin
6000000 - 1500000 = 4500000
Requirement 3. Companies breakeven point in sales doller
(Fixed expenses + Operating income) ÷ Contribution margin = Breakeven poin in sales
(600000 + 0) ÷ 0.75 = 800000
Requirement 4. If xavier embarks on this advertising campaign, sales revenue and variable cost will increased by 16% which
will couse the cintribution margin to 5220000 by 16% however fixed cost will increased by $ 200,000 due to
advertising.
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