Contribution Margin Concepts The following information is taken from the 2017 records of Hendrix's Guitar Center.

		Fixed	Variable	Total
Sales				$1,500,000
Costs
Goods sold			675,000
Labor		$320,000	120,000
Supplies		4,000	10,000
Utilities		24,000	26,000
Rent		48,000	0
Advertising		12,000	49,000
Miscellaneous		12,000	20,000
Total costs		$420,000	$900,000	(1,320,000)
Net income				$ 180,000

Required

(a.) Determine the annual break-even dollar sales volume.

Contribution margin ratio: Answer

Annual break-even dollar sales volumes: $Answer

(b.) Determine the current margin of safety in dollars. $Answer

(c.) Prepare a cost-volume-profit graph for the guitar shop. Label both axes in dollars with maximum values of $1,000,000. Draw a vertical line on the graph for the current ($750,000) sales level, and label total variable costs, total fixed costs, and total profits at $75,000 sales.

(d.) What is the annual break-even dollar sales volume if management makes a decision that increases fixed costs by $60,000? $Answer