Problem #2

The following income statement refers to 2014 performance:

Sales $5,000,000

Cost of Goods Sold $3,500,000

Gross Margin $1,500,000

Selling, General, and Administrative Expenses $1,100,000

Operating Income $ 400,000

If Cost of Goods Sold had no fixed costs, but Selling, General and Administrative Expenses included $60,000 in commissions and $140,000 in other variable costs related to sales volume:

What was the Contribution Margin for 2014?

What was the Contribution Margin Percentage for 2014?

If sales are expected to increase by 10% in 2015, what is the expected operating income for 2015?

What are break-even sales for 2015?