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

Fixed Variable Total

Sales $1,125,000

Costs

Goodssold 506,250

Labor $240,000 90,000

Supplies 3,000 7,500

Utilities 18,000 19,500

Rent 36,0000 0

Advertising 9,000 36,750

Miscellaneous 9,000 15,000

Total costs $315,000 $675,000 (990000)

Net income $ 135,000

(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 $40,000? $Answer