lege names. The company has fixed expenses of $1,095,000 each month plus variabl

Question

lege names. The company has fixed expenses of $1,095,000 each month plus variable expenses of $6.50 per ca 32% relates to variable operating expenses. The company sells each carton of calendars for $16.50. remaining Requirements ns of ca ent equ 1. Compute the number of cartons of calendars that Whoosh Calendars must sell 2. Compute the dollar amount of monthly sales that the company needs in order 3. Prepare the company's contribution margin income statement for June for 4. What is June's margin of safety (in dollars)? What is the operating leverage 5. By what percentage will operating income change if July's sales volume is each month to break even. u deter to earn $308,000 in operating income (round the contribution margin ratio to two decimal places). sales of 450,000 cartons of calendars. factor at this level of sales? 16% higher? Prove your answer. f month cimal pl Print Done in operat

Explanation / Answer

1) Break even Point :Fixed cost /(Price -variable expense)

            = 1095000 / (16.5 -6.5]

                1095000 / 10

                  109500 cartoons

2)CM ratio = [Price -Variable cost ]/ price

         =[16.5-6.5 ]/16.5

           = .6061

Target sales = [Fixed cost +Target Income ] /CM ratio

         =[1095000+308000]/.6061

        = 2,314,800

3)

4)Margin Of safety =Actual sales -Break even point sales

       = 7425000 -[109500*16.5]

           7425000 -1806750

            5618250

Degree of operating leverage = contribution /net income

                = 4500000/3405000

                = 1.32

CONTRIBUTION MARGIN INCOME STATEMENT Sales [450000*16.5] 7425000 less:variable expense [450000*6.5] (2925000) contribution margin 4500000 Less:Fixed cost (1095000) Net operating income 3405000

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