Indigo manufactures and sells swimsuits for $40.00 each. Theestimated income statement for 2017 is as follows:
| Sales | | $2,000,000 |
| Variable costs | | 1,040,000 |
| Contribution margin | | 960,000 |
| Fixed costs | | 790,000 |
| Pretax earnings | | $170,000 |
1) Compute the contribution margin per swimsuit and the numberof swimsuits that must be sold to break even. (Roundcontribution margin per swimsuit to 2 decimal places, e.g. 15.25and break even swimsuits to 0 decimal places, e.g.125.)
2) What is the margin of safety in the number of swimsuits?
3) Compute the contribution margin ratio and the breakeven pointin revenues. (Round contribution margin ratio to 3decimal places, e.g. 0.256 and breakeven point to 0 decimal places,e.g. 125.)
4) What is the margin of safety in revenues? (Roundanswer to 0 decimal places, e.g. 125.)
5) Suppose next year’s revenue estimate is $150,000 higher. Whatwould be the estimated pretax earnings?
6) Assume a tax rate of 30%. How many swimsuits must be sold toearn after-tax earnings of $230,000? (Round answer to 0decimal places, e.g. 125.)
