Break-Even in Sales Revenue, Changes in Variables Carmichael Corporation is in the process of preparing next year's budget. The pro forma income statement for the current year is as follows: Sales $1,800,000 Cost of sales: Direct materials $250,000 Direct labor 180,000 Variable overhead 106,000 Fixed overhead 100,000 636,000 Gross profit $1,164,000 Selling and administrative expenses: Variable $400,000 Fixed 350,000 750,000 Operating income $414,000 Required: 1. What is the break-even sales revenue for Carmichael Corporation for the current year? In your calculations, carry the contribution margin ratio to two decimal places. $__________ 2. For the coming year, the management of Carmichael Corporation anticipates an 8 percent increase in variable costs and a $60,000 increase in fixed expenses. What is the break-even point in dollars for next year? In your computation, round the contribution margin ratio to four decimal places. Round your final answer to the nearest dollar. (CMA adapted) $_______
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Break-Even in Sales Revenue, Changes in Variables
Carmichael Corporation is in the process of preparing next year's budget. The pro forma income statement for the current year is as follows:
| Sales | $1,800,000 | |||
| Cost of sales: | ||||
| Direct materials | $250,000 | |||
| Direct labor | 180,000 | |||
| Variable overhead | 106,000 | |||
| Fixed overhead | 100,000 | 636,000 | ||
| Gross profit | $1,164,000 | |||
| Selling and administrative expenses: | ||||
| Variable | $400,000 | |||
| Fixed | 350,000 | 750,000 | ||
| Operating income | $414,000 |
Required:
1. What is the break-even sales revenue for Carmichael Corporation for the current year? In your calculations, carry the contribution margin ratio to two decimal places.
$__________
2. For the coming year, the management of Carmichael Corporation anticipates an 8 percent increase in variable costs and a $60,000 increase in fixed expenses. What is the break-even point in dollars for next year? In your computation, round the contribution margin ratio to four decimal places. Round your final answer to the nearest dollar. (CMA adapted)
$_______
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
