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    Additional sales revenue needed to break-even

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    35. The income statement for Raple Stark Company for 2006 appears below.

    Raple Stark Company
    Income Statement
    For the Year Ended December 31 , 2006

    Sales (25,000 units) $ 650,000
    Variable expenses 227,500
    Contribution margin 422,500
    Fixed expenses 439,400
    Net income (loss) $ (16,900)

    Instructions
    Answer the following independent questions and show computations to support your answers:
    1. How much additional sales revenue does the company need to break-even in 2006?
    2. If the company is able to reduce variable costs by $1.25 per unit in 2007 and other costs and unit revenues remain unchanged, how many units will the company have to sell in order to earn a net income of $50,650?

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    Solution Preview

    1. How much additional sales revenue does the company need to break-even in 2006?

    =Fixed costs/(Contribution Margin ratio)
    =439400/((650000-227500)/650000)
    676000

    Hence Additional sales revenue required= Break even sales-Actual sales
    =676000-650000
    $26,000.00

    Note: Contribution ...

    Solution Summary

    This provides the steps to calculate the additional sales revenue for break-even

    $2.19

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