P7-69AComprehensive CVP problem (Learning Objectives1,2, &5)

Spirit Calendars imprints calendars with college names. The company has fixed expenses of $1,095,000 each month plus variable expenses of $4.00 per carton of calendars. Of the variable expenses, 73% is cost of goods sold, while the remaining 27% relates to variable operating expenses. The company sells each carton of calendars for $12.00.

Requirements

Compute the number of cartons of calendars that Spirit Calendars must sell each month to break even.

1. Compute the dollar amount of monthly sales that the company needs in order to earn $312,000 in operating income (round the contribution margin ratio to two decimal places).
2. Prepare the company's contribution margin income statement for June for sales of 450,000 cartons of calendars.
3. What is June's margin of safety (in dollars)? What is the operating leverage factor at this level of sales?
4. By what percentage will operating income change if July's sales volume is 12% higher? Prove your answer.