Please help with requirements 2-5 ( please show work of problems) Try Spirit Cal
ID: 2496582 • Letter: P
Question
Please help with requirements 2-5 ( please show work of problems)
Try Spirit Calendars imprints calendars with college names. The company has fixed expenses of $1,095,000 each month plus variable expenses of $6.50 per carton of calendars. Of the variable expense, 67% is Cost of Goods Sold, while the remaining 33% relates to variable operating expenses. The company sells each carton of calendars for $16.50. 1. Compute the number of cartons of calendars that Try Spirit Calendars must sell each month to 2. Compute the dollar amount of monthly sales Try Spirit Calendars needs in order to earn 3. Prepare the company's contribution margin income statement for June for sales of 495,000 4. What is June's margin of safety (in dollars)? What is the operating leverage factor at this level 5. By what percentage will operating income change if July's sales volume is 16% higher? Prove break even. $308,000 in operating income(round the contribution margin ratio to two decimal places). cartons of calendars. of sales? your answer Requirement 1. Compute the number of cartons of calendars that Try Spirit Calendars must sell ea Begin by determining the basic income statement equation. Sales revenue Variable expenses Fixed expenses Using the basic income statement equation you determined above solve for the number of cartonst The breakeven sales is cartons. Requirement 2. Compute the dollar amount of monthly sales Try Spirit Calendars needs in order to )1 (Round the contribution margin ratio to two decimal places.) The monthly sales needed to eam $308,000 in operating income is SExplanation / Answer
Splution.
1. Calculation of No of cartoon of calendar.
contribution margin per unit = $16.50 -$6.5
= $10
Break evan no of unit of calendar cartoon = $1,095,000 / $10
= 109,500 cartoon.
2. calculation of dollar amount of monthly sales .
$308,000 = $2,314,950 - $911,950 - $1,095,000.
No of unit = 140,300
Sales = $2,314,950
Veriable cosst = $911,950
Fixed cost = $1,095,000.
E.B.I.T = $308,000.
3.
4. calculation of margin of safety
Margin Of Safety = Budgeted Sales Break-even Sales
Margin Of Safety = $8,167,500 - $1,806,750
= $63,660,750
ii. opereting leverage
Operating leverage =fixed costs / variable costs.
Operating Leverage = [495,000 x (16.5 - 6.5)] / 495,000 x (16.5 - 6.5) -1,095,000
= 4,950,000 / 3,855,000
= 1.28
5. Calculation of % change in income of july sale.
Sale s of july = 495,000 x 16% = 79200
New sales ogf july = 495,000 + 79,200 = 574,200
REVENUE = 574,200 x $16.5 = 9,474,300
Veriable cost = 3,732,300
Fixed cost = 1,095,000
Net income = 4,647,000
income on sale of 495000 unit is 3,855,000
So % change in income = 4,647,000 - 3,855,000 = 792,000
= 792,000 / 4,647,000
= 20.38%
+ Sales 8167500 - Variable production expenses (such as materials, supplies, and variable overhead) 2,155,725 - Variable selling and administrative expenses 1,061,775 = Contribution margin 4,950,000 - Fixed production expenses (including most overhead) 1,095,000 - Fixed selling and administrative expenses = Net profit or loss 3,855,000