The following is Alsatian Corporation’s contribution format income statement from last month:
Sales(2000 units x $70) $140,000
Less: Variable Costs 84,000
Contribution Margin 56,000
Less: Fixed Expenses 24,000
Operating Income $32,000
The company has no beginning or ending inventories and produced and sold 2,000 units during the month.
Required:
A/ What is the company’s break-even sales in $(2)
B/ If the sales volume increases by 10% and variable costs/unit decreases by $2.00, what will the new operating income be? Produce a CVP statement (3)
C/ What sales in units would be required to attain an operating income of $39,000(2)
D/ What is the company’s margin of safety in dollars and stated as a %? (2)
E/ Part 1: What is the company’s degree of operating leverage based on the original data?(1)
Part 2: Using your answer to Part 1, if sales increased by 15% above the amounts in the original data, how much in $ would net income increase? (2)
F/ If the business requires an operating income of 20% of sales, what will be the required sales in $, assuming all costs and selling prices remain as in the original data? (4)
G/ Suppose Alsatian Corporation had a tax rate of 25% and wants to earn an after tax net income of $24,000. Calculate the sales in units that would be needed from the original data? (3)
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The following is Alsatian Corporation’s contribution format income statement from last month: Sales(2000 units x $70) $140,000 Less: Variable Costs 84,000 Contribution Margin 56,000 Less: Fixed Expenses 24,000 Operating In
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