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

		Fixed	Variable	Total
Sales				$2,250,000
Costs
Goods sold			1,012,500
Labor		$480,000	180,000
Supplies		6,000	15,000
Utilities		36,000	39,000
Rent		72,000	0
Advertising		18,000	73,500
Miscellaneous		18,000	30,000
Total costs		$630,000	$1,350,000	(1,980,000)
Net income				$ 270,000

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 $100,000? $Answer