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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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
Transcribed Image Text:Computing breakeven sales and operating income or
loss under different conditions
Gary's Steel Parts produces parts for the automobile industry. The
company has monthly fixed costs of $660,000 and a contribution
margin of 75% of revenues.
Requirements
1. Compute Gary's monthly breakeven sales in dollars. Use the
contribution margin ratio approach.
2. Use contribution margin income statements to compute Gary's
monthly operating income or operating loss if revenues are $530,000
and if they are $1,040,000.
3. Do the results in Requirement 2 make sense given the breakeven
sales you computed in Requirement 1? Explain.
Expert Solution
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