Computing Break$-$Even and Margin of Safety

Assume that last year, Cliff Consulting, a firm in Berkeley, CA$,$ had the following contribution income statement.

CLIFF CONSULTING Contribution Income Statement For the Year Ended September $30$ Sales revenue $$1,440,000$ Variable costs Cost of services $$576,000$ Selling and administrative $72,000648,000$ Contribution margin $792,000$ Fixed costs $-$ selling and administrative $528,000$ Before$-$tax profit $264,000$ Income taxes $21\%55,440$ After$-$tax profit $$208,560$

REQUIRED

a$.$ Determine the annual break$-$even point in sales revenue.

$Answer

b$.$ Determine the annual margin of safety in sales revenue.

$Answer

c$.$ What is the break$-$even point in sales revenue if management makes a decision that increases fixed costs by $$80,000?$

Note: Round up to the nearest dollar, enter $$80$ for $$79\mathrm{.}2$

$Answer

d$.$ With the current cost structure, including fixed costs of $$528,000,$ what dollar sales revenue is required to provide a before$-$tax profit of $$350,000?$

Note: Round up to the nearest dollar, enter $$80$ for $$79\mathrm{.}2$

$Answer

e$.$ Prepare an abbreviated contribution income statement to verify that the solution to requirement d will provide the desired before$-$tax profit.

Note: Round all answers to the nearest dollar, enter $$49$ for $$49\mathrm{.}3,$ or $$50$ for $$49\mathrm{.}7$