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Question - Sales-Revenue Approach - Variable-Cost Ratio

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Question - Sales-Revenue Approach: Variable-Cost Ratio; Contribution Margin Ratio

Lambert produces and sells an economy line of ski parkas. The budgeted income statement for the coming year is:

 

$

Sales

600,000

Less: Variable expenses

(400,000)

Contribution margin

200,000

Less: Fixed expenses

(120,000)

Profit before tax

80,000

Less: Tax

(24,000)

Profit after tax

56,000

Required -

1. What is Lambert's variable cost ratio? Its contribution margin ratio?

2. Suppose Lambert's actual revenues are $60,000 more than budgeted. By how much will before-tax profits increase?

3. How much sales revenue must Lambert earn in order to break even?

4. How much sales revenue must Lambert generate to earn a before-tax profit of $100,000? An after-tax profit of $84,000? Prepare a contribution income statement to verify the accuracy of your last answer.

Reference no: EM132453317

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