What is skellys variable cost ratio

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Reference no: EM13949743

Skelly Company's controller prepared the following budgeted income statement for

Sales Revenue	the coming year:
Approach; Variable	Sales	$ 315,000
Cost Ratio;	Less: Variable expenses	126,000
Contribution	Contribution margin	$189,000
Margin Ratio;	Less: Fixed expenses	63,000
Margin of Safety	Profit before taxes	$126,000
LO2, LO5	Less: Taxes	37,800
	Profit after taxes	$ 88,200

Required

1. What is Skelly's variable cost ratio? What is its contribution margin ratio?

2. Suppose Skelly's actual revenues are $46,000 more than budgeted. By how much will before-tax profits increase? Give the answer without preparing a new income statement.

3. How much sales revenue must Skelly earn to break even? What is the expected margin of safety?

4. How much sales revenue must Skelly generate to earn a before-tax profit of $90,000?

5. How much sales revenue must Skelly generate to earn an after-tax profit of $56,000? Prepare a contribution income statement to verify the accuracy of your answer.

Reference no: EM13949743

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