Fast Spirit Calendars imprints calendars with college names. The company has fixed expenses of $1,095,000 each month plus variable expenses of $4.00per carton of calendars. Of the variable expense, 71%is cost of goods sold, while the remaining 29% relates to variable operating expenses. The company sells each carton of calendars for $12.00.

.Requirement 1. Compute the number of cartons of calendars that Fast Spirit Calendars must sell each month to breakeven.

Begin by determining the basic income statement equation.

-

-

=

Operating income

Using the basic income statement equation you determined above solve for the number of cartons to break even.

The breakeven sales is

cartons.

Requirement 2. Compute the dollar amount of monthly sales Fast Spirit Calendars needs in order to earn $312,000 in operating income.Begin by determining the formula.

(

+

) /

=

Target sales in dollars

(Round the contribution margin ratio to two decimal places.)

The monthly sales needed to earn $312,000 in operating income is $

.

Requirement 3. Prepare the company's contribution margin income statement for June for sales of 455,000 cartons of calendars.

Fast Spirit
Contribution Margin Income Statement
Month Ended June 30

Requirement 4. What is June's margin of safety (in dollars)? What is the operating leverage factor at this level of sales?

Begin by determining the formula.

-

=

Margin of safety (in dollars)

The margin of safety is $

.

What is the operating leverage factor at this level of sales? Begin by determining the formula.

/

=

Operating leverage factor

(Round the operating leverage factor to three decimal places.)

The operating leverage factor is

.

Requirement 5. By what percentage will operating income change if July's sales volume is 11% higher? Prove your answer. (Round the percentage to two decimal places.)

If volume increases 11%, then operating income will increase

%.

Prove your answer. (Round the percentage to two decimal places.)

Original volume (cartons)
Add: Increase in volume
New volume (cartons)
Multiplied by: Unit contribution margin
New total contribution margin
Less: Fixed expenses
New operating income
vs. Operating income before change in volume
Increase in operating income
Percentage change		%

acaaca Jegin by detemeing he basic income saenem equston Using the bose ncome t tement ecumon You determined bove 50ive for the nine, or c rtonstoerenn The bresheven sliesiscato he monthey sales needce so cam 5312 0 n oprtg income iss Condibution Margin Income samnt Round the operating lewerage factar to three decimalplaces. The aparating leverage factor