Alden Company prepared the following budgeted income statement for the coming year.
| Sales revenue | $ 515,000 |
| Total variable cost | 402,950 |
| Contribution Margin | $112,050 |
| Total Fixed costs | 64,800 |
| Operating income | $47,250 |
Required:
- what is Alden’s variable cost ratio? What is its contribution margin ratio? (2 Marks)
- Suppose Alden’s actual revenues are $35,000 more than budgeted. By how much will operating income increase? Give the answer without preparing a new income statement. (2 Marks)
- How much sales revenue must Alden earn to break even? Prepare a contribution margin income statement to verify the accuracy of your answer. (3 Marks)
- What is Alden’s expected margin of safety? (1 Mark)
- What is Alden’s margin of safety if sales revenue is $380,000? (2 Marks)
