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Contribution Margin Concepts The following information is taken from the 2017 records of Hendrix's Guitar Center.
Contribution Margin Concepts
The following information is taken from the 2017 records of Hendrix's Guitar Center.
FixedVariableTotalSales$1,500,000CostsGoods sold675,000Labor$320,000120,000Supplies4,00010,000Utilities24,00026,000Rent48,0000Advertising12,00049,000Miscellaneous12,00020,000Total costs$420,000$900,000(1,320,000)Net income$ 180,000
Required
(a.) Determine the annual break-even dollar sales volume.
Contribution margin ratio: Answer
Annual break-even dollar sales volumes: $Answer
(b.) Determine the current margin of safety in dollars.
$Answer
(c.) Prepare a cost-volume-profit graph for the guitar shop. Label both axes in dollars with maximum values of $1,000,000. Draw a vertical line on the graph for the current ($750,000) sales level, and label total variable costs, total fixed costs, and total profits at $75,000 sales.
(d.) What is the annual break-even dollar sales volume if management makes a decision that increases fixed costs by $60,000?
$Answer
