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Arberg Companys controller prepared the following budgeted income statement for the coming year: Sales $418,000 Variable cost 284,240 Contribution margin $133,760 Fixed cost 79,360 Operating
Arberg Companys controller prepared the following budgeted income statement for the coming year:
Sales | $418,000 |
Variable cost | 284,240 |
Contribution margin | $133,760 |
Fixed cost | 79,360 |
Operating income | $54,400 |
Required: | |
1. | What is Arbergs variable cost ratio? What is its contribution margin ratio? |
2. | Suppose Arbergs actual revenues are $30,000 more than budgeted. By how much will operating income increase? Give the answer without preparing a new income statement. |
3. | How much sales revenue must Arberg earn to break even? Prepare a contribution margin income statement to verify the accuracy of your answer. |
4. | What is Arbergs expected margin of safety? |
5. | What is Arbergs margin of safety if sales revenue is $377,000? |
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