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QUESTION:
Colton
C
o
l
t
o
n
Dry Cleaners has determined the following about its
costs:
Total variable expenses are
$ 42 comma 000
$
4
2
,
0
0
0
,
total fixed expenses are
$ 30 comma 000 comma
$
3
0
,
0
0
0
,
and the sales revenue needed to break even is
$ 50 comma 000
$
5
0
,
0
0
0
.
Determine the
company's
current
1)
sales revenue and
2)
operating income.
(
Hint:
First,
find the contribution margin
ratio;
then prepare the contribution margin income
statement.)
Question content area bottom
Part 1
Use the contribution margin income statement and the shortcut contribution margin approaches to determine
Colton's
C
o
l
t
o
n
'
s
current
(1)
sales revenue and
(2)
operating income.
Begin by computing the contribution margin ratio.
(Enter
the result as a whole
number.)
The contribution margin ratio is
%.
ANSWER:
The answer is 60%
Part B
Contribution Margin Income Statement
Sales revenue
$
105,000
Less: Variable expenses
42,000
Contribution margin
$
63,000
Less: Fixed expenses
30,000
Operating income (loss)
$
33,000
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