Question

Grover's Steel Parts produces parts for the automobile industry. The company has monthly foxed expenses of $650,000 and a contribution margin of 70% of revenues Read the requirements 0 Requirements Requirement 1. Compute Grover's Steel Parts' monthly breakeven sales in dollars. Begin by identifying the formula ( Fixed expenses – Operating income Contribution margin ratio - Breakeven sales Compute Grover's Steel Parts monthly breakeven sales in dollars. (Round your answer up to the nearest whole number) The breakeven sales in dollars is $ 928571 1. Compute Grover's Steel Parts' monthly breakeven sales in dollars. 2. Use the contribution margin ratio to project operating income (or loss) if revenues are $560,000 and if they are $1.020,000 3. Do the results in Requirement 2 make sense given the breakeven sales computed in Requirement 1? Explain Print Done

Answer 1

Ansoren Page No 0 © Break even sales dollars Breakevent sales in fred expenses cbllans = - Contribution margin vratio $650,000 70% 57.4286 ñ $928571 @ - Break even sales in dollars = $928571 Drezating fncome (los) Contribution margin e Contribution maugin vratio X Sales Prevenue Contribution mangin ratio = 70% fixed expense = $ 650,000 Operating income (loos) - Contribution margin – fined expenses

Page No @ Particular Amount $560,000 1 Amount $1020,000 70% 707 Sales orevencie Contribution margin ratio Contribution margin fixed expenses Operating income (loos) $ 398000 $714000 (6 650,000) ($650,000) 164258000) $64000 1 The company incurred profit at sales revenue of $1020,000, this level is above break even sales level. The company incurred lors at sales crevenue of $ 560,000, this level is below break even sales level. Therefore, the oresults in case make sense by proving that breakeven level is a point of no profit and no loss. It produced below at there will be a loss situation and of produced above at there toill be a situation of profit.