Question

In: Accounting

Contribution Margin Concepts The following information is taken from the 2017 records of Hendrix's Guitar Center....

Contribution Margin Concepts
The following information is taken from the 2017 records of Hendrix's Guitar Center.

Fixed Variable Total
Sales $2,250,000
Costs
Goods sold 1,012,500
Labor $480,000 180,000
Supplies 6,000 15,000
Utilities 36,000 39,000
Rent 72,000 0
Advertising 18,000 73,500
Miscellaneous 18,000 30,000
Total costs $630,000 $1,350,000 (1,980,000)
Net income $ 270,000

Required


(a.) Determine the annual break-even dollar sales volume.

Contribution margin ratio: Answer
Annual break-even dollar sales volumes: $Answer

(b.) Determine the current margin of safety in dollars.  
$Answer

(c.) Prepare a cost-volume-profit graph for the guitar shop. Label both axes in dollars with maximum values of $1,000,000. Draw a vertical line on the graph for the current ($750,000) sales level, and label total variable costs, total fixed costs, and total profits at $75,000 sales.

(d.) What is the annual break-even dollar sales volume if management makes a decision that increases fixed costs by $100,000?
$Answer

Solutions

Expert Solution

Answer:

(a)
sales =$2250000
Less: Variable cost:
goods sold =1012500
Labs = 180000
   Supplies = 15000
Utilities = 39,000
Advertising = 73500
Miscelloneous = 30,000
Total variable cost = (1350000)
Contribution margin ratio = 900000

Contribution margin ratio = contribution margin / sales
= $900,000/$2250000
= 40%

Annual breakeven dollars sales volume = fixed cost / contribution margin ratio
= $630000 / 40%
= $1575000

(b)  
current marginal safety in dollar = current sales level - Break even sales level
= $2250000 - $1575000
= $675000

(c)

Sales level Total variable cost Total fixed cost Total profit
2250000 1350000 630000 270000
2375000 1425000 630000 320000
2500000 1500000 630000 370000
2625000 1575000 630000 420000
2750000 1650000 630000 470000
2875000 1725000 630000 520000

(d)

Annual breakeven dollars sales volume = total fixed cost / contribution margin
= ($630000 + $100000) / 40%
= $730000/40%
= $1825000

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Contribution Margin Concepts The following information is taken from the 2017 records of Hendrix's Guitar Center....
Contribution Margin Concepts The following information is taken from the 2017 records of Hendrix's Guitar Center. Fixed Variable Total Sales $1,350,000 Costs Goods sold 607,500 Labor $288,000 108,000 Supplies 3,600 9,000 Utilities 21,600 23,400 Rent 43,200 0 Advertising 10,800 44,100 Miscellaneous 10,800 18,000 Total costs $378,000 $810,000 (1,188,000) Net income $ 162,000 Required (a.) Determine the annual break-even dollar sales volume. Contribution margin ratio: Answer Annual break-even dollar sales volumes: $ Answer (b.) Determine the current margin of safety in...
Contribution Margin Concepts The following information is taken from the 2017 records of Hendrix's Guitar Center....
Contribution Margin Concepts The following information is taken from the 2017 records of Hendrix's Guitar Center. Fixed Variable Total Sales $1,500,000 Costs Goods sold 675,000 Labor $320,000 120,000 Supplies 4,000 10,000 Utilities 24,000 26,000 Rent 48,000 0 Advertising 12,000 49,000 Miscellaneous 12,000 20,000 Total costs $420,000 $900,000 (1,320,000) Net income $ 180,000 Required (a.) Determine the annual break-even dollar sales volume. Contribution margin ratio:  Answer Annual break-even dollar sales volumes: $Answer (b.) Determine the current margin of safety in dollars.   $Answer...
The following information is taken from the records of XYZ Company Calculate the gross profit margin...
The following information is taken from the records of XYZ Company Calculate the gross profit margin and net profit margin using the above data, and comment on the trend you observe. COGS are $189 million in 2013 and 93 million in 2012 and 66 million in 2011 and 65 million in 2010 and 50 million in 2009 gross profit is 63 million in 2013 and 48 million in 2012 and 54 million in 2011 and 60 million in 2010 and...
The following information was taken from the records of Raiders Inc. for the year 2017. Income...
The following information was taken from the records of Raiders Inc. for the year 2017. Income tax applicable to income from continuing operations $260,000; income tax applicable to loss on discontinued operations $36,000; income tax applicable to unusual gain $45,000; income tax applicable to unusual loss $28,000. There is also unrealized holding gain on available-for-sale securities $20,000. Unusual gain $145,000 Cash dividends declared $200,000 Loss on discounted operations $115,000 Retained earnings January 1, 2017 $850,000 Administrative expenses $336,000 Cost of...
The following information was taken from the records of Skysong Inc. for the year 2017: Income...
The following information was taken from the records of Skysong Inc. for the year 2017: Income tax applicable to income from continuing operations $213,724; income tax applicable to loss on discontinued operations $28,186, and unrealized holding gain on available-for-sale securities (net of tax) $23,100. Gain on sale of equipment $97,400 Cash dividends declared $153,000 Loss on discontinued operations 82,900 Retained earnings January 1, 2017 542,500 Administrative expenses 246,100 Cost of goods sold 894,100 Rent revenue 42,300 Selling expenses 322,400 Loss...
The following information was taken from the records of Skysong Inc. for the year 2017: Income...
The following information was taken from the records of Skysong Inc. for the year 2017: Income tax applicable to income from continuing operations $213,724; income tax applicable to loss on discontinued operations $28,186, and unrealized holding gain on available-for-sale securities (net of tax) $23,100. Gain on sale of equipment $97,400 Cash dividends declared $153,000 Loss on discontinued operations 82,900 Retained earnings January 1, 2017 542,500 Administrative expenses 246,100 Cost of goods sold 894,100 Rent revenue 42,300 Selling expenses 322,400 Loss...
The following information was taken from the records of Raiders Inc. for the year 2017. Income...
The following information was taken from the records of Raiders Inc. for the year 2017. Income tax applicable to income from continuing operations $260,000; income tax applicable to loss on discontinued operations $36,000; income tax applicable to unusual gain $45,000; income tax applicable to unusual loss $28,000. There is also unrealized holding gain on available-for-sale securities $20,000. Unusual gain $145,000 Cash dividends declared $200,000 Loss on discounted operations $115,000 Retained earnings January 1, 2017 $850,000 Administrative expenses $336,000 Cost of...
The following information was taken from the records of Bridgeport Inc. for the year 2017: Income...
The following information was taken from the records of Bridgeport Inc. for the year 2017: Income tax applicable to income from continuing operations $206,448; income tax applicable to loss on discontinued operations $27,336, and unrealized holding gain on available-for-sale securities (net of tax) $23,700. Gain on sale of equipment $97,700 Cash dividends declared $139,500 Loss on discontinued operations 80,400 Retained earnings January 1, 2017 611,500 Administrative expenses 244,100 Cost of goods sold 933,800 Rent revenue 44,200 Selling expenses 277,800 Loss...
The following information was taken from the records of Skysong Inc. for the year 2017: Income...
The following information was taken from the records of Skysong Inc. for the year 2017: Income tax applicable to income from continuing operations $213,724; income tax applicable to loss on discontinued operations $28,186, and unrealized holding gain on available-for-sale securities (net of tax) $23,100. Gain on sale of equipment $97,400 Cash dividends declared $153,000 Loss on discontinued operations 82,900 Retained earnings January 1, 2017 542,500 Administrative expenses 246,100 Cost of goods sold 894,100 Rent revenue 42,300 Selling expenses 322,400 Loss...
The following information was taken from the records of Cheyenne Inc. for the year 2017: Income...
The following information was taken from the records of Cheyenne Inc. for the year 2017: Income tax applicable to income from continuing operations $177,616; income tax applicable to loss on discontinued operations $28,866, and unrealized holding gain on available-for-sale securities (net of tax) $22,100. Gain on sale of equipment $99,000 Cash dividends declared $152,500 Loss on discontinued operations 84,900 Retained earnings January 1, 2017 554,900 Administrative expenses 244,000 Cost of goods sold 770,600 Rent revenue 49,300 Selling expenses 292,100 Loss...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT