Question

In: Accounting

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

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

Blanc Company

Noir Company

Sales

$570,000 $570,000

Variable costs

342,000 285,000

Contribution margin

228,000 285,000

Fixed costs

218,880 275,880

Net income

$9,120 $9,120

1. 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:

2.

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).)

Blanc Company

Noir Company

Sales

$enter a dollar amount

$enter a dollar amount

Variable costs

enter a dollar amount enter a dollar amount

Contribution margin

enter a subtotal of the two previous amounts

enter a subtotal of the two previous amounts

Fixed costs

enter a dollar amount enter a dollar amount

Net income / (Loss)

$enter a total amount

$enter a total amount


3.

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).)

Blanc Company

Noir Company

Sales

$enter a dollar amount

$enter a dollar amount

Variable costs

enter a dollar amount enter a dollar amount

Contribution margin

enter a subtotal of the two previous amounts

enter a subtotal of the two previous amounts

Fixed costs

enter a dollar amount enter a dollar amount

Net income / (Loss)

$enter a total amount

$enter a total amount

Solutions

Expert Solution

1) Margin of safety ratio = (Actual Sales - Break Even Sales) / Actual Sales
Particulars Blanc Noir
(i) Contribution Margin $ 228,000.00 $ 285,000.00
(ii) Sales $ 570,000.00 $ 570,000.00
(i/ii = iii) Contribution Margin ratio 0.4 0.5
(iv) Fixed Cost $ 218,880.00 $ 275,880.00
(iv/iii = v) Break Even Sales $ 547,200.00 $ 551,760.00
Margin of Safety Ratio 0.040 0.032
2) Blanc Noir
Sales $ 684,000.00 $ 684,000.00
Variable Costs $ 410,400.00 $ 342,000.00
Contribution Margin $ 273,600.00 $ 342,000.00
Fixed Costs $ 218,880.00 $ 275,880.00
Net Income $   54,720.00 $   66,120.00
3) Blanc Noir
Sales $ 456,000.00 $ 456,000.00
Variable Costs $ 273,600.00 $ 228,000.00
Contribution Margin $ 182,400.00 $ 228,000.00
Fixed Costs $ 218,880.00 $ 275,880.00
Net Income $ (36,480.00) $ (47,880.00)

Hey, please let me know if you find anything incorrect first, before downvoting the solution, it's a request. I'll certainly make it correct


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