90.2K

Verified Solution

Link Copied!

Assume that last year, Cliff Consulting, a firm in Berkeley, CA$,$ had the following contribution income statement.

CLIFF CONSULTING

Contribution Income Statement

For the Year Ended September $30$

Sales revenue $$1,680,000$

Variable costs

Cost of services $$672,000$

Selling and administrative $84,000756,000$

Contribution margin $924,000$

Fixed costs $-$ selling and administrative $616,000$

Before$-$tax profit $308,000$

Income taxes $21\%64,680$

After$-$tax profit $$243,320$

REQUIRED

a$.$ Determine the annual break$-$even point in sales revenue.

$Answer $1$

$1,120,000$

b$.$ Determine the annual margin of safety in sales revenue.

$Answer $2$

$560,000$

c$.$ What is the break$-$even point in sales revenue if management makes a decision that increases fixed costs by $$80,000?$

Note: Round up to the nearest dollar, enter $$80$ for $$79\mathrm{.}2$

$Answer $3$

d$.$ With the current cost structure, including fixed costs of $$616,000,$ what dollar sales revenue is required to provide a before$-$tax profit of $$350,000?$

Note: Round up to the nearest dollar, enter $$80$ for $$79\mathrm{.}2$

$Answer $4$

$0$

e$.$ Prepare an abbreviated contribution income statement to verify that the solution to requirement d will provide the desired before$-$tax profit.

Note: Round all answers to the nearest dollar, enter $$49$ for $$49\mathrm{.}3,$ or $$50$ for $$49\mathrm{.}7$

Answer $5$

Answer $6$

Answer $7$

Answer $8$

Answer $9$

Answer & Explanation Solved by verified expert

See Answer