Question

The following CVP income statements are available for Blanc Company and Noir Company.

		Blanc Company		Noir Company
Sales		$529,000		$529,000
Variable costs		296,240		185,150
Contribution margin		232,760		343,850
Fixed costs		165,000		276,090
Net income		$67,760		$67,760

Calculate Contribution margin ratio. (Round answers to 2 decimal places, e.g. 0.32.)

		Contribution Margin Ratio
Blanc Company
Noir Company

Compute break-even point in dollars for each company. (Round answers to 0 decimal places, e.g. 1,225.)

		Break-even Point
Blanc Company		$
Noir Company		$

Compute margin of safety ratio for each company. (Round answers to 3 decimal places, e.g. 0.321.)

		Margin of Safety Ratio
Blanc Company
Noir Company

Compute the degree of operating leverage for each company. (Round answers to 1 decimal place, e.g. 1.5.)

		Degree of Operating Leverage
Blanc Company
Noir Company

Assuming that sales revenue increases by 20%, prepare a CVP income statement for each company. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answers to 0 decimal places, e.g. 1,225.)

		Blanc Company		Noir Company
Sales		$		$
Variable costs
Contribution margin
Fixed costs
Net income / (Loss)		$		$

Assuming that sales revenue decreases by 20%, prepare a CVP income statement for each company. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answers to 0 decimal places, e.g. 1,225.)

		Blanc Company		Noir Company
Sales		$		$
Variable costs
Contribution margin
Fixed costs
Net income / (Loss)		$		$

Answer 1

Contribution Margin Ratio= Contribution Margin/Saes *100

Blanc Co. :- 232760/529000*100= 44%

Noir Co. :- 343850/529000*100= 65%

Break even point= Fixed cost / CM ratio

Blanc Co:-165000/44%=$375000

Nair Co:-276090/65%=$424754

Margin of safety Old company= Actual Sales - Break even Sales

Blanc Co. = 529000-375000=$154000

Nair Co.:- 529000-424754=$104246

Degree of Operating Leverage = Contribution margin / Net operating income

Blanc Co. :- 232760/67760= 3.4

Noir Co. :- 343850/67760= 5.1

Income Statement ( Sales Revenue increase by 20%)
	Blanc Co	Noir Cco.
Sales (Existng sales * 1.20)	634800	634800
Variable cost ( Existing cost * 1.20)	355488	222180
CM	279312	412620
Fixed Cost	165000	276090
Net Income	114312	136530

Income Statement ( Sales Revenue decrease by 20%)
	Blanc Co	Noir Cco.
Sales (Existing sales * 0.80)	$4,23,200	$4,23,200
Variable cost ( Existing cost * 1.20)	$2,36,992	$1,48,120
CM	$1,86,208	$2,75,080
Fixed Cost	$1,65,000	$2,76,090
Net Income	$21,208	-$1,010

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