Question

The following CVP income statements are available for Blanc Company and Noir Company. Sales Variable costs Contribution margin Fixed costs Net income Blanc Company Noir Company $515,000 $515,000 309,000 257,500 206,000 257,500 185,400 236,900 $20,600 $20,600 Calculate Contribution margin ratio. (Round answers to 2 decimal places, e.g. 0.32.) Contribution Margin Ratio Blanc Company Noir Company e Textbook and Media Compute the break-even point in dollars for each company. (Round answers to 0 decimal places, e.g. 5,125.) Break-even Point Blanc Company $ Noir Company $ eTextbook and Media

Answer 1

		Blanc Company	Noir Company
	Sales	$515,000	$515,000
	Variable costs	$309,000	$257,500
	Contribution margin	$206,000	$257,500
	Fixed Costs	$185,400	$236,900
	Net income	$20,600	$20,600
	Contribution Margin ratio
	Blanc Company	40%	(309,000/515,000)
	Noir Company	50%	(257,500/515,000)
	Breakeven point in dollar
	Blanc Company	$463,500	(185,400/40%)
	Noir Company	$473,800	(236,900/50%)
	Margin of safety ratio=	(Current sales level-breakeven point)/Current sales level *100
	Blanc Company	10.000%	(515,000-463,500)/515,000*100
	Noir Company	8.000%	(515,000-473,800)/515,000*100
	Degree of Operating leverage=	(Contribution margin/Operating income)
	Blanc Company	10.00	(206,000/20,600)
	Noir Company	12.50	(257,500/20,600)
	When revenue increases by 20%	Blanc Company		Noir Company
	Sales	$618,000	(515,000*120%)	$618,000	(515,000*120%)
	Variable costs	$370,800	(309000*120%)	$309,000	(257500*120%)
	Contribution margin	$247,200		$309,000
	Fixed Costs	$185,400		$236,900
	Net income	$61,800		$72,100
	Sales	$412,000	(515,000*80%)	$412,000	(515,000*80%)
	Variable costs	$247,200	(309000*80%)	$206,000	(309000*80%)
	Contribution margin	$164,800		$206,000
	Fixed Costs	$185,400		$236,900
	Net income	-$20,600		-$30,900

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