Question
Stellar manufactures and sells swimsuits for $40.00 each. The estimated income statement for 2017 is as follows: Sales: $2,000,000, Variable costs: 1,090,000, contribution margin: 910,000.
Stellar manufactures and sells swimsuits for $40.00 each. The estimated income statement for 2017 is as follows:
Sales: $2,000,000, Variable costs: 1,090,000, contribution margin: 910,000. Fixed costs: 765,000. Pretax earnings: 145,000
1.Compute the contribution margin per swimsuit and the number of swimsuits that must be sold to break even. (Round contribution margin per swimsuit to 2 decimal places, e.g. 15.25 and break even swimsuits to 0 decimal places, e.g. 125.)
2.What is the margin of safety in the number of swimsuits? 3.Compute the contribution margin ratio and the breakeven point in revenues. (Round contribution margin ratio to 3 decimal places, e.g. 0.256 and breakeven point to 0 decimal places, e.g. 125.)
4.What is the margin of safety in revenues? (Round answer to 0 decimal places, e.g. 125.)
5.Suppose next years revenue estimate is $200,000 higher. What would be the estimated pretax earnings?
6.Assume a tax rate of 30%. How many swimsuits must be sold to earn after-tax earnings of $180,000? (Round answer to 0 decimal places, e.g. 125.)
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