Break-Even in Sales Revenue, Variable-Costing Ratio, Contribution Margin Ratio, Margin of Safety Hammond Company runs a driving range and golf shop. The budgeted income statement for the coming year is as follows. Sales $1,240,000 Less: Variable expenses 706,800 Contribution margin $533,200 Less: Fixed expenses 425,000 Income before taxes $108,200 Less: Income taxes 43,280 Net income $64,920 1. What is Hammond’s variable cost ratio? Enter your answer as a decimal value rounded to two decimal places. What is the contribution margin ratio? Enter your answer as a decimal value rounded to two decimal places. (Express as a decimal-based amount rather than a whole percent.) f 2. Suppose Hammond’s actual revenues are $200,000 greater than budgeted. By how much will before-tax profits increase? Calculate the answer without preparing a new income statement. 3. How much sales revenue must Hammond earn in order to break even? Round your answer to the nearest dollar. What is the expected margin of safety? Round your answer to the nearest dollar. 4. How much sales revenue must Hammond generate to earn a before-tax profit of $130,000? Round your answer to the nearest dollar. How much sales revenue must Hammond generate to earn an after-tax profit of $90,000? Round your answer to the nearest dollar.
Break-Even in Sales Revenue, Variable-Costing Ratio, Contribution Margin Ratio, Margin of Safety
Hammond Company runs a driving range and golf shop. The
| Sales | $1,240,000 |
| Less: Variable expenses | 706,800 |
| Contribution margin | $533,200 |
| Less: Fixed expenses | 425,000 |
| Income before taxes | $108,200 |
| Less: Income taxes | 43,280 |
| Net income | $64,920 |
1. What is Hammond’s variable cost ratio? Enter your answer as a decimal value rounded to two decimal places.
What is the contribution margin ratio? Enter your answer as a decimal value rounded to two decimal places. (Express as a decimal-based amount rather than a whole percent.)
f
2. Suppose Hammond’s actual revenues are $200,000 greater than budgeted. By how much will before-tax profits increase? Calculate the answer without preparing a new income statement.
3. How much sales revenue must Hammond earn in order to break even? Round your answer to the nearest dollar.
What is the expected margin of safety? Round your answer to the nearest dollar.
4. How much sales revenue must Hammond generate to earn a before-tax profit of $130,000? Round your answer to the nearest dollar.
How much sales revenue must Hammond generate to earn an after-tax profit of $90,000? Round your answer to the nearest dollar.
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