Isaac Company had revenues of $930,000 last year with total variable costs of $353,400 and fixed costs

Question:

Isaac Company had revenues of $930,000 last year with total variable costs of $353,400 and fixed costs of $310,000.

Required:

1. What is the variable cost ratio for Isaac? What is the contribution margin ratio?

2. What is the break-even point in sales revenue?

3. What was the margin of safety for Isaac last year?

4. Isaac is considering starting a multimedia advertising campaign that is supposed to increase sales by $7,500 per year. The campaign will cost $5,000. Is the advertising campaign a good idea? Explain.

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...