College TeamCollege Team Calendars imprints calendars with college names. The company has fixed expenses of $1,065,000 each month plus variable expenses of $3.50 per carton of calendars. Of the variable expense, 75% is cost of goods sold, while the remaining 25% relates to variable operating expenses. The company sells each carton of calendars for $13.50. Requirements 1.Compute the number of cartons of calendars that College Team College Team Calendars must sell each month to break even. 2.Compute the dollar amount of monthly sales that the company needs in order to earn $ $304,000 in operating income (round the contribution margin ratio to two decimal places). 3.Prepare the company's contribution margin income statement for June for sales of 450,000 cartons of calendars. 4.What is June's margin of safety (in dollars)? What is the operating leverage factor at this level of sales? 5.By what percentage will operating income change if July's sales volume is 11% higher? Prove your answer. Requirement 1. Compute the number of cartons of calendars that College TryCollege Try Calendars must sell each month to breakeven.Begin by determining the basic income statement equation. Operating Sales revenue Variable expenses Fixed expenses income Using the basic income statement equation you determined above solve for the number of cartons to break even. The breakeven sales is cartons. Requirement 2. Compute the dollar amount of monthly sales College TryCollege Try Calendars needs in order to earn $304000 in operating income. Begin by determining the formula. Target operating Contribution margin Target sales in ( Fixed expenses + income )/ ratio dollars (Round the contribution margin ratio to two decimal places.) The monthly sales needed to earn $304000 in operating income is $ Requirement 3. Prepare the company's contribution margin income statement for June for sales of 450,000 cartons of calendars. College Try Contribution Margin Income Statement Month Ended June 30 Sales revenue Variable expenses: Cost of goods sold Operating expenses Contribution margin Fixed expenses Operating income Requirement 4. What is June's margin of safety (in dollars)? What is the operating leverage factor at this level of sales? Begin by determining the formula. Sales revenue at Margin of safety (in Sales revenue breakeven = dollars) The margin of safety is $ + What is the operating leverage factor at this level of sales? Begin by determining the formula. Operating leverage Contribution margin / Operating income factor (Round the operating leverage factor to three decimal places.) The operating leverage factor is Requirement 5. By what percentage will operating income change if July's sales volume is 11% higher? Prove your answer. (Round the percentage to two decimal places.) If volume increases 14%, then operating income will increase %. Prove your answer. (Round the percentage to two decimal places.) Original volume (cartons) Add: Increase in volume New volume (cartons) Multiplied by: Unit contribution margin New total contribution margin Less: Fixed expenses New operating income vs. Operating income before change in volume Increase in operating income Percentage change %
