Mirabella Cosmetics manufactures and sells a face cream to small ethnic stores in the greater New York

Question:

Mirabella Cosmetics manufactures and sells a face cream to small ethnic stores in the greater New York area. It presents the monthly operating income statement shown here to George Lopez, a potential investor in the business. Help Mr. Lopez understand Mirabella’s cost structure.

1 2 3 Units sold 3456 NES 4 Revenues 7 Home A 5 Cost of goods sold 8 9 Gross margin 11 Insert Page Layout B

Required:
1. Recast the income statement to emphasize contribution margin.
2. Calculate the contribution margin percentage and breakeven point in units and revenues for June 2014.
3. What is the margin of safety (in units) for June 2014?
4. If sales in June were only 8,000 units and Mirabella’s tax rate is 30%, calculate its net income.

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