Question
The following information is taken from the 2017 records of Hendrix's Guitar Center Fixed Variable Total Sales $2,250,000 Costs Goods sold 1,012,500 Labor $480,000 180,000
The following information is taken from the 2017 records of Hendrix's Guitar Center
| Fixed Variable | Total | |||
|---|---|---|---|---|
| Sales | $2,250,000 | |||
| Costs | ||||
| Goods sold | 1,012,500 | |||
| Labor | $480,000 | 180,000 | ||
| Supplies | 6,000 | 15,000 | ||
| Utilities | 36,000 | 39,000 | ||
| Rent | 72,000 | 0 | ||
| Advertising | 18,000 | 73,500 | ||
| Miscellaneous | 18,000 | 30,000 | ||
| Total costs | $630,000 | $1,350,000 | (1,980,000) | |
| Net income | $ 270,000 | |||
(a.) Determine the annual break-even dollar sales volume.
Contribution margin ratio: Answer Annual break-even dollar sales volumes: $Answer
(b.) Determine the current margin of safety in dollars. $Answer
(c.) Prepare a cost-volume-profit graph for the guitar shop. Label both axes in dollars with maximum values of $1,000,000. Draw a vertical line on the graph for the current ($750,000) sales level, and label total variable costs, total fixed costs, and total profits at $75,000 sales.
(d.) What is the annual break-even dollar sales volume if management makes a decision that increases fixed costs by $100,000?
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Accounting Tools for Business Decision Making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
5th edition
9780470418239, 470239808, 9780470239803, 470418230, 978-1118128169
