Problem: Athletico, Inc. manufactures warm-up suits. The company's projected income for the coming year, based on sales of 160,000 units, is as follows:
Sales $8,000,000
Operating Expanses
Variable Expanses $2,000,000
Fixed Expanses $3000,000
Total Expanses $5,000,000
Net Income $3,000,000
Required:
In completing the following requirements, ignore income taxes.
1.Prepare a CVP graph for Athletico, Inc. for the coming year.
2.Calculate the firm's break-even point for the year in sales dollars.
3.What is the company's margin of safety for the year?
4.Compute Athletico's operating leverage factor, based on the budgeted sales volume for the year.
5.Compute Athletico's required sales in dollars in order to earn income of $4,500,000 in the coming year.
6.Describe the firm's cost structure. Calculate the percentage relationships between variable and fixed expenses and sales revenue.