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Income statement question

Prepare a contribution margin format income statement-calculate break-even point. Presented here is the income statement for Pace. Co. for August:

Sales $100,000.00
Cost of Goods Sold $54,000.00
Gross Profit $46,000.00
Operating Expenses $37,000.00
Operating Income $9,000.00

Based on an analysis of cost behavior patterns, it has been determined that the company's contribution margin ratio is 30%.

Required:

a. Rearrange the preceding income statement to the contribution margin format.

b. Calculate operating income if sales volume increases by 10%.
(Note: Do not construct an income statement to get your answer.)

c. Calculate the amount of revenue required for Pace to break even.

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Solution Preview

a. Rearrange the preceding income statement to the contribution margin format.

The contribution margin ratio is 30%. This means that the variable costs are 70% of the sales. The total costs are 54,000+37,000=91,000. Sales = 100,000. Variable cost = 70,000. Total costs=fixed costs+ variable costs. Fixed costs = ...

Solution Summary

The solution explains how to prepare a contribution margin format income statement and the calculation of breakeven.

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