Determine the annual break-even point in sales dollars

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Reference no: EM131959537

In the year 2008, Mark Processing Company had the following contribution income statement:

MARK PROCESSING COMPANY Contribution Income Statement For the Year 2008

Sales $1,000,000

Variable costs

Cost of goods sold $460,000

Selling and administrative 200,000 (660,000)

Contribution margin 340,000

Fixed Costs

Factory overhead 192,000

Selling and administrative 80,000 (272,000)

Before-tax profit 68,000

Income taxes (38%) (25,840)

After-tax profit $42,160

HINT: Round the contribution margin ratio to two decimal places for your calculations below.

(a) Determine the annual break-even point in sales dollars.

(b) Determine the annual margin of safety in sales dollars.

(d) With the current cost structure, including fixed costs of $272,000, what dollar sales volume is required to provide an after-tax net income of $160,000?

Do not round until your final answer. Round your answer to the nearest dollar.

(e) Prepare an abbreviated contribution income statement to verify that the solution to part (d) will provide the desired after-tax income.

Round your answers to the nearest dollar. Use rounded answers for subsequent calculations. Do not use negative signs with any of your answers.

MARK PROCESSING COMPANY Income Statement For the Year 2008

Sales $

Variable costs

Contribution margin

Fixed costs

Net income before taxes

Income taxes (38%)

Net income after taxes

Reference no: EM131959537

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