Arberg Company’s controller prepared the following budgeted income statement for the coming year: Sales $417,000 Variable...

Arberg Company’s controller prepared the following budgeted income statement for the coming year:


Sales	$417,000
Variable cost	287,730
Contribution margin	$129,270
Fixed cost	75,950
Operating income	$53,320

	Required:
1.	What is Arberg’s variable cost ratio? What is its contribution margin ratio?
2.	Suppose Arberg’s actual revenues are $29,900 more than budgeted. By how much will operating income increase? Give the answer without preparing a new income statement.
3.	How much sales revenue must Arberg earn to break even? Prepare a contribution margin income statement to verify the accuracy of your answer.
4.	What is Arberg’s expected margin of safety?
5.	What is Arberg’s margin of safety if sales revenue is $378,000?

Amount Descriptions

Refer to the list below for the exact wording of text items within your income statement.

Amount Descriptions
Operating income
Operating loss
Sales
Total contribution margin
Fixed cost
Variable cost

Ratios and Revenue

1. What is Arberg’s variable cost ratio? What is its contribution margin ratio?

Variable cost ratio	%
Contribution margin ratio	%

2. Suppose Arberg’s actual revenues are $29,900 more than budgeted. By how much will operating income increase?

3(a) How much sales revenue must Arberg earn to break even?

Contribution Margin Income Statement

3(b) Prepare a contribution margin income statement to verify the accuracy of your answer. Refer to the list of Amount Descriptions for the exact wording of text items within your income statement.

Arberg Company

Contribution Margin Income Statement

For the Coming Year

1
2
3
4
5

Margin of Safety

4. What is Arberg’s expected margin of safety?

5. What is Arberg’s margin of safety if sales revenue is $378,000?

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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