Conway Electrical Services provides services to two types of clients: residential and commercial. The company’s contribution margin income statement for the year is shown (this is the base case). Fixed costs are known in total, but Conway does not allocate fixed costs to each department.

Required:

Find the break-even point in sales dollars.

What is the margin of safety in sales dollars?

What amount of sales dollars is required to earn an annual profit of $750,000?

Refer to the base case shown previously. What would the operating profit be if the Commercial variable costs are 20 percent higher than originally anticipated? How does this increase in Commercial variable costs impact the operating leverage of the company?

Residential Commercial Total $1,500,000 375,000 $1,125,000 Sales $600,000 $900,000 275,000 $625,000 Variable costs 100,000 $500,000 Contribution margin Fixed costs 600,000 Operating profit $ 525,000