Use the information from the following Income Statement to create and Projected

Question

Use the information from the following Income Statement to create and Projected Income Statement and solve the questions at bottom of the page. Complete the Income State to reflect the expected sales increase, then also complete the grey cells at the bottom of the page. Complete the other two spreadsheets in this workbook and after doing all the calculations discuss the impact of variable versus fixed expenses. Include in your conclusion which company you think is in the better financial situation and why. Use 3-4 paragraphs for your total discussion. Income Statement Projected Income Statement Sales Revenue $2,500,000 Variable Costs Purchases $750,000 0.3 Direct labor $600,000 0.24 $1,350,000 $1,150,000 Fixed Costs Selling $500,000 Administrative $485,000 Manufacturing Overhead $150,000 $1,135,000 Profit Dollars Percentage Calculate the Contribution Margin Calculate the Gross Margin Ratio Calculate Breakeven Sales Calculate Margin of Safety based on the 5% expected sales increase. Use the information from the following Income Statement to create and Projected Income Statement and solve the questions at bottom of the page. Complete the Income State to reflect the expected sales increase, then also complete the grey cells at the bottom of the page. Complete the other two spreadsheets in this workbook and after doing all the calculations discuss the impact of variable versus fixed expenses. Include in your conclusion which company you think is in the better financial situation and why. Use 3-4 paragraphs for your total discussion. Income Statement Projected Income Statement Sales Revenue $2,500,000 Variable Costs Purchases $750,000 0.3 Direct labor $600,000 0.24 $1,350,000 $1,150,000 Fixed Costs Selling $500,000 Administrative $485,000 Manufacturing Overhead $150,000 $1,135,000 Profit Dollars Percentage Calculate the Contribution Margin Calculate the Gross Margin Ratio Calculate Breakeven Sales Calculate Margin of Safety based on the 5% expected sales increase.

Explanation / Answer

Breakeven Sales = Total Fixed Cost / Contribution Margin (%) = 11,35,000 / 46% = 24,67,391

Revised Sales = 2,500,000 * 1.05 = 2,625,000

Margin of Safety = Actual Sales - Breakeven Sales = 26,25,000 - 24,67,391 = 157,609

Margin of Safety (%)= (Actual Sales - Breakeven Sales)/Actual Sales = (26,25,000 - 24,67,391)/26,25,000 = 157,609/26,25,000 = 6%

Total Cost Per Unit Cost No. of Units Sold (A) (B) C= A/B 7,50,000 0.30 25,00,000 6,00,000 0.24 25,00,000

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