PROBLEM
Sales Revenue Approach
Ace Consulting provides advice to farmers. The operating results for the organisation in 2013 are as follows:
|
Sales
|
802,429
|
|
Less: Variable costs
|
030.0001
|
|
Contribution margin
|
372,429
|
|
Less: Fixed expenses
|
(154 750)
|
|
Net profit
|
717 679
|
Required:
1. What is the contribution margin ratio for 2013?
2. Compute Ace's break-even point for 2013 in dollars.
3. What level of sales dollars must be reached to earn a profit after tax of $420,000? Assume a tax rate of 30%.
4. What issues could be raised about your analysis in part 3 with respect to fixed costs?