Break-Even in Sales Revenue, Variable-Costing Ratio, Contribution Margin Ratio, Margin of Safety Nealon 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 781,200 Contribution margin $458,800 Less: Fixed expenses 425,500 Income before taxes $33,300 Less: Income taxes 11,655 Net Income $21,645 Required: 1. What is Nealon's variable cost ratio? Enter your answer as a decimal value rounded to two decimal places. 0.63 What is the contribution margin ratio? Enter your answer as a decimal value rounded to two decimal places. (Express as a decimal-based amount rather than a whole percent.) 0.37 2. Suppose Nealon's actual revenues are $190,000 greater than budgeted. By how much will before-tax profits increase? Calculate the answer without preparing a new income statement. 70,300 3. How much sales revenue must Nealon earn in order to break even? Round your answer to the nearest dollar. 1,150,000 What is the expected margin of safety? Round your answer to the nearest dollar. $ 90,000 4. How much sales revenue must Nealon generate to earn a before-tax profit of $50,000? Round your answer to the nearest dollar. 1,285,135 How much sales revenue must Nealon generate to earn an after-tax profit of $35,000? Round your answer to the nearest dollar. 1,244,595 x Feedback 4. How much sales revenue must Nealon generate to earn a before-tax profit of $50,000? Round your answer to the nearest dollar. 1,285,135 How much sales revenue must Nealon generate to earn an after-tax profit of $35,000? Round your answer to the nearest dollar. 1,244,595 x Feedback Check My Work 1. Variable cost ratio = Variable costs / Sales. Contribution margin ratio = Contribution margin / Sales. 2. Multiply actual revenues by contribution margin ratio. 3. Calculate break-even sales revenue (Total fixed costs / contribution margin ratio). Use this amount to determine the expected margin of safety. 4. To determine the amount of sales revenue to generate a before-tax profit of $50,000, use the formula: Fixed Costs + Desired target profit / Contribution margin ratio. To determine the amount of sales revenue to generate an after-tax profit of $35,000, first calculate after-tax operating income. Use the formula After-tax profit / (1 - tax rate). The tax rate can be determined by dividing Income taxes by Income before income taxes. Then use the formula Fixed costs + After-tax operating income divided by Contribution margin ratio. Prepare a contribution margin income statement to verify the accuracy of your last answer. Round your answers to the nearest dollar. Nealon Company Contribution Margin Income Statement Sales Less: Variable expenses Contribution margin Less: Fixed expenses Profit before taxes Taxes Net income