Hammond Company runs a driving range and golf shop The budgeted income statement for the coming year is as follows Sales $1,240,000 Less Variable expenses 706,800 Contribution margin $ 533,200 Less Fixed expenses 425,000 Income before taxes $ 108,200 Less Income taxes 43,280 Net income $ 64,920 Req...

1 Variable cost ratio 7068001240000 057 Contribution margi ...

Hammond Company runs a driving range and golf shop. The budgeted income statement for the coming year

Question:

Hammond Company runs a driving range and golf shop. The budgeted income statement for the coming year is as follows.
Sales ....................................... $1,240,000
Less: Variable expenses .................... 706,800
...................... $ 533,200
Less: Fixed expenses ........................ 425,000
Income before taxes ....................... $ 108,200
Less: Income taxes ............................ 43,280
Net income .................................. $ 64,920
Required:
1. What is Hammond's variable cost ratio? Its ratio?
2. Suppose Hammond's actual revenues are $200,000 greater than budgeted. By how much will before-tax profits increase? Give the answer without preparing a new income statement.
3. How much sales revenue must Hammond earn in order to break even? What is the expected margin of safety? (Round your answers to the nearest dollar.)
4. How much sales revenue must Hammond generate to earn a before-tax profit of $130,000? An after-tax profit of $90,000? (Round your answers to the nearest dollar.) Prepare a income statement to verify the accuracy of your last answer.
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...