imprints calendars with college and university names. The company has fixed expenses of

$1,035,000

each month plus variable expenses of

$3.60

per carton of calendars. Of the variable expense,

68%

is cost of goods sold, while the remaining

32%

relates to variable operating expenses.

VastSpirit

sells each carton of calendars for

$10.50.

Requirements

1.	Use the income statement equation approach to compute the number of cartons of calendars that VastSpirit must sell each month to break even.
2.	Use the contribution margin ratio shortcut formula to compute the dollar amount of monthly sales VastSpirit needs in order to earn $285,000 in operating income (round the contribution margin ratio to two decimal places).
3.	Prepare VastSpirit's contribution margin income statement for June for sales of 465,000 cartons of calendars.
4.	What is June's margin of safety (in dollars)? What is the operating leverage factor at this level of sales?
5.	By what percentage will operating income change if July's sales volume is 13% higher? Prove your answer.

Question content area bottom

Part 1

Requirement 1. Use the income statement equation approach to compute the number of cartons of calendars that

VastSpirit

must sell each month to break even.

Begin by determining the basic income statement equation.

Sales revenue

-

Variable expenses

-

Fixed expenses

=

Operating income

Part 2

Using the basic income statement equation you determined above, solve for the number of cartons to break-even. (Round the number of cartons up to the nearest whole carton.)

The break-even sales is

enter your response here

cartons.