Jackson Company recently calculated its break-even sales revenue to be $15,000.

Question

Jackson Company recently calculated its break-even sales revenue to be $15,000. For each dollar of sales revenue, $0.70 goes to cover variable costs.

a. Compute the contribution margin ratio. (Omit the "%" sign in your response.)

Contribution margin ratio %

b. Compute the total fixed costs. (Omit the "$" sign in your response.)

Total fixed costs $

c.

Compute the sales revenue that would have to be generated to earn an operating income of $9,000. (Omit the "$" sign in your response.)

Sales revenue $

Explanation / Answer

1. Contribution margin ratio: contribution/sales 0.30/1 = 0.3 or 30% 2. Total fixed costs Break even sales is $15,000 which contributes 15,000 x 0.30 = $4,500 as contribution and since at break even the fixed costs equal contribution the fixed costs must be $4,500 3. Sales revenue to earn a profit of $9,000 Contribution = Fixed costs ($4,500) + Profit ($9,000) or $13,500 which equates with 30% C/S ratio. The desired sales is $13,500/0.30 = $45,000

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