Question

The following CVP income statements are available for Blanc Company and Noir Company Blanc Company Noir Company Sales Variable costs Contribution margin Fixed costs Net income $494,000 286,520 207,480 165,000 $42,480 $494,000 192,660 301,340 258,860 $42,480 Calculate Contribution margin ratio. (Round answers to 2 decimal places, e.g. 0.32.) Contribution Margin Ratio Blanc Company Noir Company LINK TO TEXT VIDEO: SIMILAR PROBLEM Compute break-even point in dollars for each company. (Round answers to 0 decimal places, e.g. 1,225.) Break-even Point Blanc Company s Noir Company

Answer 1

Answers

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Working		Blanc Company	Noir Company
A	Contribution margin	$          207,480.00	$        301,340.00
B	Sales	$          494,000.00	$        494,000.00
C = A/B	Contribution margin ratio = ANSWER	0.42	0.61

Working		Blanc Company	Noir Company
A	Fixed Costs	$                165,000	$              258,860
B	Contribution margin ratio [calculated above]	0.42	0.61
C = A/B	Break Even point in Dollars = ANSWER	$                392,857	$              424,361

Working		Blanc Company	Noir Company
A	Sales	$                494,000	$              494,000
B	Break Even Sales	$                392,857	$              424,361
C = A - B	Margin of Safety in Dollars	$                101,143	$                 69,639
D = (C/A)	Margin of Safety ratio = ANSWER	0.20	0.14

Working		Blanc Company	Noir Company
A	Contribution margin	$                207,480	$              301,340
B	Net Income	$                  42,480	$                 42,480
C = A/B	Degree of Operating Leverage = ANSWER	4.9	7.1

---CVP Statement if sales increases by 20%

Working		Blanc Company	Noir Company
A	Sales revenue	$                592,800	$              592,800
B = A - C	Variable cost	$                343,824	$              231,192
C	Contribution margin	$                248,976	$              361,608
D	Fixed Cost	$                165,000	$              258,860
E = C- D	Net Income	$                  83,976	$              102,748

Working for above

Working		Blanc Company	Noir Company
A	Sales revenue	=494000*1.2	=494000*1.2
B = A - C	Variable cost	=592800-248976	=592800-361608
C	Contribution margin	=592800*0.42	=592800*0.61
D	Fixed Cost	165000	258860
E = C- D	Net Income	=248976-165000	=361608-258860

---CVP Statement if Sales decreases by 20%

Working		Blanc Company	Noir Company
A	Sales revenue	$                395,200	$              395,200
B = A - C	Variable cost	$                229,216	$              154,128
C	Contribution margin	$                165,984	$              241,072
D	Fixed Cost	$                165,000	$              258,860
E = C- D	Net Income	$                        984	$              (17,788)

Working for above:

Working		Blanc Company	Noir Company
A	Sales revenue	=494000*0.8	=494000*0.8
B = A - C	Variable cost	=395200-165984	=395200-241072
C	Contribution margin	=395200*0.42	=395200*0.61
D	Fixed Cost	165000	258860
E = C- D	Net Income	=165984-165000	=241072-258860