Tom’s Treasures Income Statement . . .For Year Ended 12/31/17

Sales (85,000 units) . . ... . . .$5,500,000

Variable Expenses . . . . . . .$2,475,000

Contribution Margin . . . . . . . $3,025,000

Fixed Expenses. . . . . . . . . .$1,785.000

Net Operating Income . . . . . . $1,240,000

Additional Formulas Needed:

1. Sales – Variable expenses = Contribution Margin

2. B/E Units = Fixed Costs / CM per unit

3. B/E $ = B/E Units x Sales price per unit

4. B/E $ = Fixed Costs / CM ratio

5. Safety Margin = Budgeted sales – Breakeven sales

6. Sales – Total Variable Cost– Total Fixed Cost = Profit (Income)

7. Sales – Variable Cost = CM; CM – Fixed Costs = Profit (Income)

8. Sales (units) = Fixed Costs+ target net profit / CM/unit

Calculate the following:

A) Compute the Income Statement on a per unit basis and as a percent of sales and provide

that information in two columns to the right of the total dollar information provided.

B) Calculate the sales price per unit and the variable expenses per unit

C) Compute the company’s contribution margin ratio.

D) Compute the company’s break-even point in units.

E) Compute the company’s break-even point in dollars.

E) Calculate the company’s margin of safety in dollars.

F) Assume that next year, management wants to earn a profit of $2,000,000. How many units

must be sold to reach this target profit?

Answer rating: 100% (QA)

A Toms Treasures Income Statement For Year Ended 123117 Sales 85000 units 5500000 Variable Expenses 2475000 Contribution Margin 3025000 Fixed Expenses 1785000 Net Operating Income 1240000 Per Unit of ... View the full answer