Robert’s Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $720,000 and a contribution margin of 90% of revenues.

Requirements
1. Compute Robert’s Steel Parts’ monthly breakeven sales in dollars.
2. Use the contribution margin ratio to project operating income (or loss) if revenues are $540,000 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.