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19 March, 13:51

Contribution Margin Ratio, Variable Cost Ratio, Break-Even Sales Revenue The controller of Ashton Company prepared the following projected income statement: $88,000 23,760 $64,240 43,800 $20,440 Total variable cost Contribution margin Total fixed cost Operating income Required: 1. Calculate the contribution margin ratio. Note: Enter as a percent, rounded to the nearest whole number. 2. Calculate the variable cost ratio. Note: Enter as a percent, rounded to the nearest whole number. 3. Calculate the break-even sales revenue for Ashton. Note: Round your answer to the nearest dollar. 4. How could Ashton increase projected operating income without increasing the total sales revenue?

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  1. 19 March, 16:28
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    1. Contribution Margin Ratio = 73%

    2. Variable Cost ratio = 27%

    3. Break-even Sales = $60,000

    Explanation:

    Sales $88,000

    Total variable cost $23,760

    Contribution margin $64,240

    Total Fixed Cost $43,800

    Operating Income $20,440

    1. Contribution Margin Ratio = Contribution margin / Sales = $64,240 / 88,000 = 73%

    2. Variable Cost ratio = Variable cost / sales = $23,760 / $ 88,000 = 27%

    3. Break-even Sales = Fixed Cost / Contribution margin = $43,800 / 73% = $60,000
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