Question
RoyaltyRoyalty Beauty manufactures and sells a face cream to small specialty stores in the greater Los Angeles area. It presents the monthly operating income statement
RoyaltyRoyalty
Beauty manufactures and sells a face cream to small specialty stores in the greater Los Angeles area. It presents the monthly operating income statement shown here to George
GomezGomez, a potential investor in the business. Help Mr. GomezGomez understand RoyaltyRoyalty Beauty's cost structure.
Royalty Beauty
Operating Income Statement, June 2017
Units sold
10,000
Revenues
$120,000
Cost of goods sold
Variable manufacturing costs
$65,000
Fixed manufacturing costs
28,240
Total
93,240
Gross margin
26,760
Operating costs
Variable marketing costs
$2,200
Fixed marketing and administrative costs
14,000
Total operating costs
16,200
Operating income
$10,560
| . | Recast the income statement to emphasize contribution margin. |
| 2. | Calculate the contribution margin percentage and breakeven point in units and revenues for June 20172017. |
| 3. | What is the margin of safety (in units) for June 20172017? |
| 4. | If sales in June were only 9 comma 5009,500 units andRoyaltyRoyalty's tax rate is3030%, calculate its net income. |
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