Question

Calendars imprints calendars with college names. The company has fixed expenses of

$ 1 comma 065 comma 000$1,065,000

each month plus variable expenses of

$ 3.50$3.50

per carton of calendars. Of the variable? expense,

7575?%

is cost of goods?sold, while the remaining

2525?%

relates to variable operating expenses. The company sells each carton of calendars for

$ 13.50$13.50.

Read the

requirements

LOADING...

.

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

cartons.

Requirement 2. Compute the dollar amount of monthly sales

College SpiritCollege Spirit

Calendars needs in order to earn

$ 304 comma 000$304,000

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 $304,000 in operating income is $

.

Requirement 3. Prepare the? company's contribution margin income statement for June for sales of

460 comma 000460,000

cartons of calendars.

??

College Spirit
Contribution Margin Income Statement
Month Ended June 30
	Sales revenue
	Variable expenses:
	Cost of goods sold
	Operating expenses
	Contribution margin
	Fixed expenses
	Operating income

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 $				.

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

.

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

%.

Prove your answer. ?(Round the percentage to two decimal? places.)

Original volume (cartons)
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		%

Answer 1