Xavier Medical Supply is a retailer of home medical equipment. Last year, Xavier's sales revenues totaled $6,400,000. Total expenses were $2,800,000. Of this amount, approximately $1,792,000 were variable, while the remainder were fixed. Since Xavier's offers thousands of different products, its managers prefer to calculate the breakeven point in terms of sales dollars rather than units. Read the requirements. Requirement 1. What is Xavier's current operating income? - Requirements Begin by identifying the formula to compute the operating income. Operating income Contribution margin Fixed expenses Operating income Sale price Sales revenue Units sold Variable expenses 1. What is Xavier's current operating income? 2. What is Xavier's contribution margin ratio? 3. What is the company's breakeven point in sales dollars? (Hint: The contribution margin ratio calculated in Requirement 2 is already weighted by the company's actual sales mix.) 4. Xavier's top management is deciding whether to embark on a $230,000 advertising campaign. The marketing firm has projected annual sales volume to increase by 18% as a result of this campaign. Assuming that the projections are correct, what effect would this advertising campaign have on the company's annual operating income? Print Done Try Spirit Calendars imprints calendars with college names. The company has fixed expenses of $1,065,000 each month plus variable expenses of $3.50 per carton of calendars. Of the variable expense, 69% is cost of goods sold, while the remaining 31% relates to variable operating expenses. The company sells each carton of calendars for $13.50. Read the requirements. Requirement 1. Compute the number of cartons of calendars that Try Spirit Calendars must sell each month to breakeven. x Requirements Begin by determining the basic income statement equation. = Operating income Contribution margin Fixed expenses Number of cartons Sales revenue Variable expenses 1. Compute the number of cartons of calendars that Try Spirit Calendars must sell each month to break even. 2. Compute the dollar amount of monthly sales that the company needs in order to earn $304,000 in operating income (round the contribution margin ratio to two decimal places) 3. Prepare the company's contribution margin income statement for June for sales of 480,000 cartons of calendars. 4. What is June's margin of safety (in dollars)? What is the operating leverage factor at this level of sales? 5. By what percentage will operating income change if July's sales volume is 12% higher? Prove your answer. Print Done