Elgart Company produces plastic mailboxes The projected income statement for the coming year follows Sales $460,300 Total variable cost 165,708 Contribution margin $294,592 Total fixed cost 150,000 Operating income $144,592 Required 1 Compute the Contribution margin ratio for the mailboxes 2 How mu...

1 Contribution margin ratio 294592460300 064 or 64 2 Breakeven sales revenue 15000006 ...

Elgart Company produces plastic mailboxes. The projected income statement for the coming year follows: Sales ...............$460,300 Total

Question:

Elgart Company produces plastic mailboxes. The projected income statement for the coming year follows:
Sales ...............$460,300
Total variable cost ......... 165,708
........$294,592
Total fixed cost ........... 150,000
Operating income .........$144,592

Required:
1. Compute the ratio for the mailboxes.
2. How much revenue must Elgart earn in order to break even?
3. What is the effect on the ratio if the unit selling price and unit variable cost each increase by 15 percent?
4. Suppose that management has decided to give a 4 percent commission on all sales. The projected income statement does not reflect this commission. Recompute the ratio, assuming that the commission will be paid. What effect does this have on the break-even point?
5. If the commission is paid as described in Requirement 4, management expects sales revenues to increase by $80,000. How will this affect operating leverage? Is it a sound decision to implement the commission? Support your answer with appropriate computations. Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...