Share
Explore BrainMass

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.

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.

$2.19