Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen

Exercise 33

BREAK-EVEN IN SALES REVENUE, VARIABLE-COSTING RATIO, CONTRIBUTION MARGIN RATIO, MARGIN OF SAFETY
Furyk Company runs a driving range and golf shop. The budgeted income statement for the coming year is as follows.

Required:
1. What is Furyk's variable cost ratio? Its contribution margin ratio?
2. Suppose Furyk's actual revenues are $150,000 greater than budgeted. By how much will before-tax profits increase? Give the answer without preparing a new income statement.
3. How much sales revenue must Furyk earn in order to break even? What is the expected margin of safety? (Round your answers to the nearest dollar.)
4. How much sales revenue must Furyk generate to earn a before-tax profit of $120,000? An after-tax profit of $120,000? (Round your answers to the nearest dollar.) Prepare a contribution margin income statement to verify the accuracy of your last answer.