Assignment Problem: 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:
|
|
$
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Sales
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600,000
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Less: Variable expenses
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-400,000
|
|
Contribution margin
|
200,000
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|
Less: Fixed expenses
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-120,000
|
|
Profit before tax
|
80,000
|
|
Less: Tax
|
-24,000
|
|
Profit after tax
|
56,000
|
Required:
Question 1: What is Lambert's variable cost ratio? Its contribution margin ratio?
Question 2: Suppose Lambert's actual revenues are $60,000 more than budgeted. By how much will before-tax profits increase?
Question 3: How much sales revenue must Lambert earn in order to break even?
Question 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.
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