Problem 16.34 Break-Even in Sales Revenue, Variable-Costing Ratio, Contribution Margin Ratio, Margin of Safety

Hammond Company runs a driving range and golf shop. The budgeted income statement forthe coming year is as follows.

Required:

1.What is Hammond?s variable cost ratio? Enter your answer as a decimal value rounded to two decimal places. _________________

What is the contribution margin ratio? Enter your answer as a decimal value rounded to two decimal places. (Express as a decimal-based amount rather than a whole percent.) _________________

2.Suppose Hammond?s actual revenues are $200,000 greater than budgeted. By how much will before-tax profits increase? Calculate the answer without preparing a new income statement. $ _________________

3.How much sales revenue must Hammond earn in order to break even? Round your answer to the nearest dollar. $ _________________

What is the expected margin of safety? Round your answer to the nearest dollar. $ _________________

4.How much sales revenue must Hammond generate to earn a before-tax profit of $130,000? Round your answer to the nearest dollar. $ _________________

How much sales revenue must Hammond generate to earn an after-tax profit of $90,000? Round your answer to the nearest dollar. $ _________________

Prepare a contribution margin income statement to verify the accuracy of your last answer. Round your answers to the nearest dollar.