Problem: The management of Budget Inc. is conducting an internal audit and preparing the operating budget based on wages and salaries. They are requesting the following:
1. At what point does payroll reach the break- even point with the service calls (Volume)?
The accounting department provided you with the following information:
- Technician wages: $24.00
- Manager's salary: $57,000
- Initially, the contribution margin (CM) ratio is 38%
2. Using your answers from above, what if:
Wages where increased by 2%
Manager's salary was increased by 5%
How many more service calls (Volume) would be needed to remain at a break even point?
3. Using your answers from above, what if:
Unit Revenue was increased by $5.-
Advertising expenses are increased by $15,000
Service calls (Volume) is increased by 27%
What would the Operating Income be?