Presented here is the income statement for Edwards Co. for February: Based on an

Question

Presented here is the income statement for Edwards Co. for February:

Based on an analysis of cost behavior patterns, it has been determined that the company's contribution margin ratio is 34%.

Rearrange the preceding income statement to the contribution margin format. (Amounts to be deducted should be indicated with minus sign. Omit the "$" sign in your response.)

Calculate operating income if sales volume increases by 8%. (Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

Calculate the amount of revenue required for Edwards to break even. (Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

Sales $ 85,000 Cost of goods sold 41,500 Gross profit $ 43,500 Operating expenses 31,000 Operating income $ 12,500

Explanation / Answer

since contribution is 34%,

variable cost will be 66%.

sales = 85000

-variable cost(66%) = 85000*.66= -56100

contribution(34%)= 28900

- fix cost (41500+31000-56100)= -16400

profit = 12500

if sale increase by 8%, contribution also increase by 8%

contribution = 28900*1.08 = 31212

- fixed cost = -16400

profit = 14812

breakeven = fixed cost/contribution% = 16400/.34 = 48235.29

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