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    Able Co: Income statement, break even and CVP analysis

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    Last year, Able Co. sold all the goods it produced (it had no finished goods inventories), and sales revenue were 1,260,000. It recorded the following cost for the year: see attached file

    Manufacturing Selling and Admin Total
    Costs Costs

    Variable $420,000 $150,000 $570,000
    Fixed 220,500 260,000 480,500
    Total $640,500 $410,000 $1,050,500

    (a)
    Sales
    - Cost of Goods Sold (Expense)
    Gross Margin or Gross Profit
    Selling & Admin (or GS&A or Operating expenses)
    Net income (Operating income)

    (b) Revenue - Variable costs - Fixed costs = Profit

    (c) Let Y = sales dollars necessary for a before-tax target profit of $250,000

    (Revenue - Variable costs)/Revenue = Contribution margin ratio (Round to six decimal places)
    The contribution margin ratio =

    Using equation (2.10),
    Y = (Target Profit + Fixed Cost)/Contribution Margin Ratio

    (d) Let Y = sales dollars necessary to break even

    Using equation (2.11),
    Y = Fixed Cost/Contribution Margin Ratio

    a. Prepare a financial reporting income statement (that is, in the form required under GAAP for U.S. External reporting).
    b. Detemine income in the manner used in cost-volume-profit analysis
    c. At what sales dollar level will Able earn a before-tax target profit of $250,000
    d. At what sales dollar level will Able break even.

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    https://brainmass.com/business/income-statement/able-co-income-statement-break-even-cvp-analysis-197855

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    Please see the attached file.

    Manufacturing Costs Selling & Admin Costs Total Costs
    Variable $420,000 $150,000 $570,000
    Fixed 220,500 260,000 480,500
    Total $640,500 $410,000 $1,050,500

    Sales $1,260,000.00
    - Cost of Goods Sold (Expense) $640,500
    ...

    $2.19

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