The controller of OBAMA CARE has forecasted an income statement for the coming y

Question

The controller of OBAMA CARE has forecasted an income statement for the coming year: Gnarly Furniture Projected income statement: Revenue $860,000 Variable costs 215,000 Contribution Margin $645,000 Fixed costs 525,000 Profit $120,000 Required: 1.Compute the projected break-even point in sales revenue. Prepare an income statement to prove your answer. 2.Compute the projected sales revenue to generate a before-tax profit of $140,000. Prepare an income statement to prove your answer 3. Compute the projected sales revenue to generate a before-tax profit of 10% of sales revenue. Prepare an income statement to prove your answer. 4. What is the profit at $100,000 of revenue above the break-even point? Prepare an income statement to prove your answer The controller of OBAMA CARE has forecasted an income statement for the coming year: Gnarly Furniture Projected income statement: Revenue $860,000 Variable costs 215,000 Contribution Margin $645,000 Fixed costs 525,000 Profit $120,000 Required: 1.Compute the projected break-even point in sales revenue. Prepare an income statement to prove your answer. 2.Compute the projected sales revenue to generate a before-tax profit of $140,000. Prepare an income statement to prove your answer 3. Compute the projected sales revenue to generate a before-tax profit of 10% of sales revenue. Prepare an income statement to prove your answer. 4. What is the profit at $100,000 of revenue above the break-even point? Prepare an income statement to prove your answer

Explanation / Answer

Revenue $       860,000 Variable Cost $       215,000 25% Contribution Margin $       645,000 75% Fixed cost $       525,000 Profit $       120,000 1 SP x Rev - V%Rev - FC CM% x Rev - FC = 0 0.75 x Rev - 525000 = 0 0.75 x rev = 525000 Rev = 525000 / .75 $       700,000 Sales revenue $       700,000 Variable cost $       175,000 25% Contribution margin $       525,000 75% FC $       525,000 Profit $                  -   2 CM%*Rev - FC = 0 0.75*Rev - 525,000 =$140,000 0.75*Rev = $525,000 + $140,000 Rev = $665,000 /0.75 $       886,667 Sales revenue $       886,667 Variable cost $       221,667 25% Contribution margin $       665,000 75% FC $       525,000 Profit $       140,000 3 CM%*Rev x FC = 0 0.75*Rev x $525,000 = 10% x Rev 0.75*Rev x 0.10 x Rev = $525,000 0.65 x Rev = $525,000 Rev = $       807,692 Sales revenue $       807,692 Variable cost $       201,923 25% Contribution margin $       605,769 75% FC $       525,000 Profit $         80,769 807692 x 10% 4 CM x Change in Rev = Change in Profit Rev at break even $       700,000 Change in profit = 100000 x .75 $         75,000 Revenue $       800,000 $700,000+$100,000 Variable Cost $       200,000 $800,000*0.25 Contribution Margin $       600,000 $800,000*0.75 Fixed cost $       525,000 Profit $         75,000 $0+$75,000

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