Calendars imprints calendars with college names. The company has fixed expenses of $1,095,000 each month plus variable expenses of $6.50 per carton of calendars. Of the variable​ expense, 74​% is cost of goods​ sold, while the remaining 26​% relates to variable operating expenses. The company sells each carton of calendars for $16.50. 1. Begin by determining the basic income statement equation.     -   -   = Operating income Compute the number of cartons of calendars that College Spirit Calendars must sell each month to break even.   2. Compute the dollar amount of monthly sales that the company needs in order to earn $308,000 in operating income​ (round the contribution margin ratio to two decimal​ places).   Begin by determining the formula. (   +   ) /   = Target sales in dollars 3. Prepare the​ company's contribution margin income statement for June for sales of 450,000 cartons of calendars 4.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Calendars imprints calendars with college names. The company has fixed expenses of $1,095,000 each month plus variable expenses of $6.50 per carton of calendars. Of the variable​ expense, 74​% is cost of goods​ sold, while the remaining 26​% relates to variable operating expenses. The company sells each carton of calendars for $16.50.

1.
Begin by determining the basic income statement equation.
 
 
-
 
-
 
=
Operating income

Compute the number of cartons of calendars that College Spirit Calendars must sell each month to break even.  

2.

Compute the dollar amount of monthly sales that the company needs in order to earn $308,000 in operating income​ (round the contribution margin ratio to two decimal​ places).  

Begin by determining the formula.
(
 
+
 
) /
 
=
Target sales in dollars
3.

Prepare the​ company's contribution margin income statement for June for sales of 450,000 cartons of calendars

4.
What is​ June's margin of safety​ (in dollars)? What is the operating leverage factor at this level of​ sales?
Begin by determining the formula.
 
 
-
 
=
Margin of safety (in dollars)
What is the operating leverage factor at this level of​ sales? Begin by determining the formula.
 
 
/
 
=
Operating leverage factor
5.
By what percentage will operating income change if​ July's sales volume is 16​%​higher? Prove your answer.
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