E6-22 Computing Target Profit, Preparing Contribution Margin Income Statement, Computing Margin of Safety [LO 6-2, 6-3]

Erin Shelton, Inc., wants to earn a target profit of $880,000 this year. The companys fixed costs are expected to be $1,160,000 and its variable costs are expected to be 60 percent of sales. Erin Shelton, Inc., earned $780,000 in profit last year. Required: 1. Calculate break-even sales for Erin Shelton, Inc. 2. Prepare a contribution margin income statement on the basis break-even sales. (Do not leave any cells blank, enter a zero wherever required.) 3. Calculate the required sales to meet the target profit of $880,000. 4. Prepare a contribution margin income statement based on sales required to earn a target profit of $880,000. 5. When the company earns $880,000 of net income, what is its margin of safety and margin of safety as a percentage of sales? (Round your "Percentage Sales" answer to 2 decimal places. (i.e. .1234 should be entered as 12.34%.))