The following information is taken from the 2017 records of Hendrix's Guitar Center

Fixed Variable Total

Sales $1,875,000

Costs

Goods sold 843,750

Labor $400,000 150,000

Supplies 5,000 12,500

Utilities 30,000 32,500

Rent 60,000 0

Advertising 15,000 61,250

Misc. 15,000 25,000

Total costs $525,000 $1,125,000 (1,650,000)

Net income $ 225,000

(a.) Determine the annual break-even dollar sales volume.

Contribution margin ratio:

(b.) Determine the current margin of safety in dollars.

(c.) Prepare the 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 $80,000?