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Additional sales revenue needed to break-even

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?

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