Homework Answers
(1)
contribution margin ratio = contribution margin/sales
= $477750/$735000
= 65%
variable cost ratio = variable expenses/sales
= $257250/$735000
= 35%
(2)
Break even sales = fixed expenses/contribution margin
ratio
= $292500/65%
= $450000
(3)
margin of safety (in dollars) = total sales - break even
sales
= $735000 - $450000
= $285000
(4)
Operating income would increase by $200000 x 65% = $130000
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