Reference no: EM131870158
Problem - BREAK-EVEN IN SALES REVENUE, VARIABLE-COSTING RATIO, CONTRIBUTION MARGIN RATIO, MARGIN OF SAFETY
Furyk Company runs a driving range and golf shop. The budgeted income statement for the coming year is as follows.
Sales $800,000
Less: Variable expenses 344,000
Contribution margin $456,000
Less: Fixed expenses 310,000
Income before taxes $146,000
Less: Income taxes 51,100
Net income $ 94,900
Required:
1. What is Furyk's variable cost ratio? Its contribution margin ratio?
2. Suppose Furyk's actual revenues are $150,000 greater than budgeted. By how much will before-tax profits increase? Give the answer without preparing a new income statement.
3. How much sales revenue must Furyk earn in order to break even? What is the expected margin of safety? (Round your answers to the nearest dollar.)
4. How much sales revenue must Furyk generate to earn a before-tax profit of $120,000? An after-tax profit of $120,000? (Round your answers to the nearest dollar.) Prepare a contribution margin income statement to verify the accuracy of your last answer.