Question

Biblio Files Company

Contribution Margin Income Statement

For the Year Ended December 31

1	Sales			$424,000.00
2	Variable costs:
3	Manufacturing		$169,600.00
4	Selling		16,960.00
5	Administrative		67,840.00	254,400.00
6	Contribution margin			$169,600.00
7	Fixed costs:
8	Manufacturing		$88,000.00
9	Selling		8,000.00
10	Administrative		10,000.00	106,000.00
11	Income from operations			$63,600.00 Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31 1 Sales $424,000.00 2 Variable costs: 3 Manufacturing $233,200.00 4 Selling 21,200.00 5 Administrative 63,600.00 318,000.00 6 Contribution margin $106,000.00 7 Fixed costs: 8 Manufacturing $5,000.00 9 Selling 4,000.00 10 Administrative 33,400.00 42,400.00 11 Income from operations $63,600.00 Target Profit Shaded cells have feedback. Refer again to the income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statement panels. Note that both companies have the same sales and net income. Answer questions (1) - (3) that follow, assuming that all data for the coming year is the same as the current year, except for the amount of sales. If required, round answers to the nearest dollar. 1. If Cover-to-Cover Company wants to increase its profit by $30,000 in the coming year, what must their amount of sales be?

Answer 1

Sales = (Fixed cost + Desired profit) / profit volume ratio.

PV ratio = Contribution margin * 100 / Sales.

PV ratio = $ 106,000* 100 / $ 424000 = 25 %

Sales = (42,400 + 63600 + 30000) / 25 % = $ 544000