Garys Steel Parts produces parts for the automobile industry The company has monthly fixed costs of $660,000 and a contribution margin of 75 of revenues Requirements 1 Compute Garys monthly breakeven sales in dollars Use the contribution margin ratio approach 2 Use contribution margin income statem...

Req 1 Breakeven sales in dollars Fixed costs Operating income C ...

Garys Steel Parts produces parts for the automobile industry. The company has monthly fixed costs of $660,000

Question:

Gary’s Steel Parts produces parts for the automobile industry. The company has monthly fixed costs of $660,000 and a of 75% of revenues.
Requirements
1. Compute Gary’s monthly breakeven sales in dollars. Use the ratio approach.
2. Use income statements to compute Gary’s monthly operating income or operating loss if revenues are $530,000 and if they are $1,040,000.
3. Do the results in Requirement 2 make sense given the breakeven sales you computed in Requirement 1? Explain.

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...