Gordon's Steel Parts produces parts for the automobile industry. The company has monthly fixed costs of \(\$ 640,000\) and a contribution margin of \(80 \%\) of revenues.

Requirements 

1. Compute Gordon's monthly breakeven sales in dollars. Use the contribution margin ratio approach.

2. Use contribution margin income statements to compute Gordon's monthly operating income or operating loss if revenues are \(\$ 500,000\) and if they are \(\$ 1,000,000\).

3. Do the results in Requirement 2 make sense given the breakeven sales you computed in Requirement 1? Explain.