Erin Shelton, Incorporated, wants to earn a target profit of $860,000 this year. The company's fixed...

   

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Erin Shelton, Incorporated, wants to earn a target profit of $860,000 this year. The company's fixed costs are expected to be $1,120,000 and its variable costs are expected to be 60 percent of sales. Erin Shelton, Incorporated, earned $760,000 in profit last year. Required: 1. Calculate break-even sales for Erin Shelton, Incorporated. 2. Prepare a contribution margin income statement on the basis of break-even sales. 3. Calculate the required sales to meet the target profit of $860,000. 4. Prepare a contribution margin income statement based on sales required to earn a target profit of $860,000. 5. When the company earns $860,000 of net income, what is its margin of safety and margin of safety as a percentage of sales? Erin Shelton, Incorporated, wants to earn a target profit of $860,000 this year. The company's fixed costs are expected to be $1,120,000 and its variable costs are expected to be 60 percent of sales. Erin Shelton, Incorporated, earned $760,000 in profit last year. Required: 1. Calculate break-even sales for Erin Shelton, Incorporated. 2. Prepare a contribution margin income statement on the basis of break-even sales. 3. Calculate the required sales to meet the target profit of $860,000. 4. Prepare a contribution margin income statement based on sales required to earn a target profit of $860,000. 5. When the company earns $860,000 of net income, what is its margin of safety and margin of safety as a percentage of sales?

Answer rating: 100% (QA)

To answer the questions we need to calculate the following 1 Breakeven sales Fixed costs Variable costs as a percentage of sales 2 Contribution margin income statement on the basis of breakeven sales ... View the full answer