Question
Cerling company produces a variety of chemicals. One division makes reagents for laboratories. the division's projected income statement for the coming year is sales 218000
Cerling company produces a variety of chemicals. One division makes reagents for laboratories. the division's projected income statement for the coming year is
sales 218000 X price $ 60.00 13080000
total var. cost. 7630000
contrb. margin 5450000
total fixed cost 4250000
operating income 1200000
Part 1
Contribution margin $5,450,000
Sales in units 13,080,000
Unit contribution margin
Total fixed cost $4,250,000
Unit contribution margin
Break-even units
Unit contribution margin
Sales price per unit $60
Contribution margin ratio
Sales price per unit $60
Break-even units
Break-even sales
Part 2
Increase in revenues
Contribution margin ratio
Increased contribution margin
Increase in advertising costs $250,000
Increased operating income
Part 3
Sales exceeding estimate $1,500,000
Contribution margin ratio
Underestimated profits
Part 4
Sales $13,080,000
Break-even sales
Margin of safety in dollars
Part 5
Contribution margin $5,450,000
Operating Income $1,200,000
Operating leverage
Higher percentage of sales 8%
Operating leverage
Increase in operating income
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