Question
Erin Shelton, Inc., wants to earn a target profit of $930,000 this year. The companys fixed costs are expected to be $1,260,000 and its variable
Erin Shelton, Inc., wants to earn a target profit of $930,000 this year. The companys fixed costs are expected to be $1,260,000 and its variable costs are expected to be 60 percent of sales. Erin Shelton, Inc., earned $830,000 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 $930,000.
4. Prepare a contribution margin income statement based on sales required to earn a target profit of $930,000.
5. When the company earns $930,000 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%.))
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started