Look over the formulas for calculating: (1) the sales needed to break even (net income is 0); (2) the sales needed to reach a target profit; and (3) the margin of safety between the break even point sales and management's plan (budget). Calculate all three for one of these CM Income Statements:

a) Sales Revenue$780,000

Variable Costs:

Manufacturing420,000

Operating Expenses24,000444,000

Contribution Margin$336,000

CM %__?___

Fixed Costs:

Manufacturing132,000

Operating Expenses85,000217,000

Operating Income$119,000

b) Sales Units100,000

SALES REVENUE$220,000$2.20

VARIABLE EXPENSES:

Direct Materials35,0000.35

Direct Labor135,0001.35

Variable Overhead10,0000.10

Variable Selling5,0000.05

TOTAL VARIABLE COSTS185,0001.85

CONTRIBUTION MARGIN$ 35,000$0.35

FIXED: COSTS:

Manufacturing15,000

Selling and Administrative65,000

80,000

OPERATING INCOME$45,000