Stewart's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $630,000 and a contribution margin of 75% of revenues. Stewart feels like he's in a giant squeeze play: The automotive manufacturers are demanding lower prices, and the steel producers have increased raw material costs. Stewart's contribution margin has shrunk to 45% of revenues. The company's monthly operating income, prior to these pressures, was $157,500. Read the requirements Requirements Requirement 1. To maintain this same level of profit, what sales volume (in sales revenue) must Stewart now achieve? Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach. Target sales in dollars 1. To maintain this same level of profit, what sales volume (in sales revenue) must Stewart now achieve? 2. Stewart believes that his monthly sales revenue will only go as high as $1,050,000. He is thinking about moving operations overseas to cut fixed costs. If monthly sales are $1,050,000, by how much will he need to cut fixed costs to maintain his prior profit level of $157,500 per month? Print Done The contribution margin income statement of Top of the Crop Coffee for January follows: (Click the icon to view the contribution margin income statement.) Top of the Crop Coffee sells three small coffees for every large coffee. A small coffee sells for $3.00, with a variable expense of $1.50. A large coffee sells for $5.00, with a variable expense of $2.50. Read the requirements Requirement 1. Determine the coffee shop's monthly breakeven point in the numbers of small coffees and large coffees. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of expenses: variable and fixed. Begin by identifying the formula to compute the total breakeven point in units. (Abbreviations used: avg. = Average; CM = Contribution margin.) ( Breakeven sales in units Contribution margin ratio Fixed expenses Operating income Units sold Variable expenses Weighed-avg. CM per unit The contribution margin income statement of Top of the E (Click the icon to view the contribution margin inca Top of the Crop Coffee sells three small coffees for ev x Data Table x bffee sells for $ Requirements Read the requirements. Requirement 1. Determine the coffee shop's monthly categories of expenses: variable and fixed. preparing a sul Top of the Crop Coffee Contribution Margin Income Statement Month Ended January 31 Begin by identifying the formula to compute the total b Sales revenue 1. Determine the coffee shop's monthly breakeven point in the numbers of small coffees and large coffees. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of expenses: variable and fixed. 2. Compute the coffee shop's margin of safety in dollars. 3. Use the coffee shop's operating leverage factor (using the January contribution margin income statement) to determine its new operating income if sales volume increases 11%. Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged. $ 126,000 Less variable expenses: $ 45,500 Cost of goods sold Marketing expense 16,000 1,500 General and administrative expense 63,000 Print Done Contribution margin $ 63,000 Less fixed expenses Marketing expense $ 22,400 5,600 General and administrative expense 28,000 $ 35,000 Operating income Print Done Stewart's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $630,000 and a contribution margin of 75% of revenues. Stewart feels like he's in a giant squeeze play: The automotive manufacturers are demanding lower prices, and the steel producers have increased raw material costs. Stewart's contribution margin has shrunk to 45% of revenues. The company's monthly operating income, prior to these pressures, was $157,500. Read the requirements Requirements Requirement 1. To maintain this same level of profit, what sales volume (in sales revenue) must Stewart now achieve? Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach. Target sales in dollars 1. To maintain this same level of profit, what sales volume (in sales revenue) must Stewart now achieve? 2. Stewart believes that his monthly sales revenue will only go as high as $1,050,000. He is thinking about moving operations overseas to cut fixed costs. If monthly sales are $1,050,000, by how much will he need to cut fixed costs to maintain his prior profit level of $157,500 per month? Print Done The contribution margin income statement of Top of the Crop Coffee for January follows: (Click the icon to view the contribution margin income statement.) Top of the Crop Coffee sells three small coffees for every large coffee. A small coffee sells for $3.00, with a variable expense of $1.50. A large coffee sells for $5.00, with a variable expense of $2.50. Read the requirements Requirement 1. Determine the coffee shop's monthly breakeven point in the numbers of small coffees and large coffees. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of expenses: variable and fixed. Begin by identifying the formula to compute the total breakeven point in units. (Abbreviations used: avg. = Average; CM = Contribution margin.) ( Breakeven sales in units Contribution margin ratio Fixed expenses Operating income Units sold Variable expenses Weighed-avg. CM per unit The contribution margin income statement of Top of the E (Click the icon to view the contribution margin inca Top of the Crop Coffee sells three small coffees for ev x Data Table x bffee sells for $ Requirements Read the requirements. Requirement 1. Determine the coffee shop's monthly categories of expenses: variable and fixed. preparing a sul Top of the Crop Coffee Contribution Margin Income Statement Month Ended January 31 Begin by identifying the formula to compute the total b Sales revenue 1. Determine the coffee shop's monthly breakeven point in the numbers of small coffees and large coffees. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of expenses: variable and fixed. 2. Compute the coffee shop's margin of safety in dollars. 3. Use the coffee shop's operating leverage factor (using the January contribution margin income statement) to determine its new operating income if sales volume increases 11%. Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged. $ 126,000 Less variable expenses: $ 45,500 Cost of goods sold Marketing expense 16,000 1,500 General and administrative expense 63,000 Print Done Contribution margin $ 63,000 Less fixed expenses Marketing expense $ 22,400 5,600 General and administrative expense 28,000 $ 35,000 Operating income Print Done