partial credit,P7-69B (similar to) Question Help College SpiritCollege Spirit Ca
ID: 2520562 • Letter: P
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partial credit,P7-69B (similar to)
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College SpiritCollege Spirit
Calendars imprints calendars with college names. The company has fixed expenses of
$ 1 comma 095 comma 000$1,095,000
each month plus variable expenses of
$ 6.50$6.50
per carton of calendars. Of the variable? expense,
6969?%
is cost of goods?sold, while the remaining
3131?%
relates to variable operating expenses. The company sells each carton of calendars for
$ 16.50$16.50.
Read therequirements
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.Requirement 1. Compute the number of cartons of calendars that
College SpiritCollege Spirit
Calendars must sell each month to breakeven.??
Begin by determining the basic income statement equation.
Sales revenue
-
Variable expenses
-
Fixed expenses
=
Operating income
Using the basic income statement equation you determined above solve for the number of cartons to break even.
The breakeven sales is
109,500
cartons.
Requirement 2. Compute the dollar amount of monthly sales
College SpiritCollege Spirit
Calendars needs in order to earn
$ 308 comma 000$308,000
in operating income.??
Begin by determining the formula.
(
Fixed expenses
+
Target operating income
) /
Contribution margin ratio
=
Target sales in dollars
?(Round the contribution margin ratio to two decimal? places.)
The monthly sales needed to earn $308,000 in operating income is $
2,300,000
.
Requirement 3. Prepare the? company's contribution margin income statement for June for sales of
475 comma 000475,000
cartons of calendars.
??
College Spirit
Contribution Margin Income Statement
Month Ended June 30
Sales revenue
$7,837,500
Variable expenses:
Cost of goods sold
$2,130,375
Operating expenses
957,125
3,087,500
Contribution margin
4,750,000
Fixed expenses
1,095,000
Operating income
$3,655,000
Requirement 4. What is? June's margin of safety? (in dollars)? What is the operating leverage factor at this level of? sales?
Begin by determining the formula.
Sales revenue
-
Sales revenue at breakeven
=
Margin of safety (in dollars)
The margin of safety is $
6,030,750
.
What is the operating leverage factor at this level of? sales? Begin by determining the formula.
Contribution margin
/
Operating income
=
Operating leverage factor
?(Round the operating leverage factor to three decimal? places.)
The operating leverage factor is
1.300
.
Requirement 5. By what percentage will operating income change if? July's sales volume is
1111?%
?higher? Prove your answer. ?(Round the percentage to two decimal? places.)
If volume increases 11%, then operating income will increase
14.30
%.
Prove your answer. ?(Round the percentage to two decimal? places.)
Original volume (cartons)
475000
Add: Increase in volume
New volume (cartons)
Multiplied by: Unit contribution margin
New total contribution margin
Less: Fixed expenses
New operating income
vs. Operating income before change in volume
Increase in operating income
Percentage change
%
Enter any number in the edit fields and then click Check Answ
partial credit,P7-69B (similar to)
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Explanation / Answer
Original volume (cartons) 4,75,000 Add: Increase in volume 52,250 New volume (cartons) 5,27,250 Multiplied by: Unit contribution margin 10.00 New total contribution margin 52,72,500 Less: Fixed expenses 10,95,000 New operating income 41,77,500 vs. Operating income before change in volume 36,55,000 Increase in operating income 5,22,500 Percentage change 14.30 %
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