Indigo manufactures and sells swimsuits for $40.00 each. The estimated income statement for 2017 is as...

Indigo manufactures and sells swimsuits for $40.00 each. The estimated income statement for 2017 is as follows:

Sales		$2,000,000
Variable costs		1,040,000
	Contribution margin	960,000
Fixed costs		790,000
	Pretax earnings	$170,000

1) Compute the contribution margin per swimsuit and the number of swimsuits that must be sold to break even. (Round contribution margin per swimsuit to 2 decimal places, e.g. 15.25 and break even swimsuits to 0 decimal places, e.g. 125.)

2) What is the margin of safety in the number of swimsuits?

3) Compute the contribution margin ratio and the breakeven point in revenues. (Round contribution margin ratio to 3 decimal places, e.g. 0.256 and breakeven point to 0 decimal places, e.g. 125.)

4) What is the margin of safety in revenues? (Round answer to 0 decimal places, e.g. 125.)

5) Suppose next year’s revenue estimate is $150,000 higher. What would be the estimated pretax earnings?

6) Assume a tax rate of 30%. How many swimsuits must be sold to earn after-tax earnings of $230,000? (Round answer to 0 decimal places, e.g. 125.)

Expert Solution

ekkarill92 answered 1 year ago

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