Contribution margin, gross margin, and margin of safety Mirabella Cosmetics manufactures and sells a face cream to small ethnic stores in the greater New York area. It presents the monthly operating income statement shown here to George Lopez, a potential investor in the business. Help Mr. Lopez understand Mirabella's cost structure..
If you want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com/horngren/cost13e download the template for Exercise 3-31.
1. Recast the income statement to emphasize contribution margin.
2. Calculate the contribution margin percentage and breakeven point in units and revenues for June 2008.
3. What is the margin of safety (in units) for June 2008?
4. If sales in June were only 8,000 units and Mirabella's tax rate is 30%, calculate its netincome