Use this info to answer questions 18 through 20: Fixed Expenses Rent $24,000 Sal

Question

Use this info to answer questions 18 through 20:

Fixed Expenses

Rent $24,000

Salaries $40,000

Depreciation $13,000

Variable Expenses

Cost of Goods Sold 58% of sales

Supplies 7% of sales

Sales Commissions 5% of sales


18. What is the company's contribution margin ratio?
A. 30%
B. 70%
C. Cannot be determined

19. What is the break-even point in dollars?
A. $77,000
B. $110,000
C. $256,667

20. If the company wants to earn a profit of $35,000, what is the amount of sales the company must achieve?
A. $112,000
B. $145,000
C. $373,333

Explanation / Answer

18. Sales Price (100%) Variable expenses (58+7+5) = 70% CM = 30% B 19. Break-even point in dollars = Fixed expenses / CM = (24000 + 40000 + 13000) / .3 = 77000 / .3 = $256,667 C 20. To earn a profit they must satisfy the following: $35000 in profit = (profit + fixed expenses) / CM = (35000+77000)/.3 = 373,333 C

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