Companies have a margin of safety of 25%, a contribution margin ratio of 30%, and sales of

Question:

Companies have a margin of safety of 25%, a ratio of 30%, and sales of $1,000,000.
(a) What was the break-even point?
(b) What was the operating income?
(c) If neither the relationship between variable costs and sales nor the amount of fixed costs is expected to change in the next year, how much additional operating income can be earned by increasing sales by $110,000?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...