Question - Break-Even in Sales Revenue, Margin of Safety
Sports-Reps, Inc., represents professional athletes and movie and television stars. The agencyhad revenue of $12,345,000 last year, with total variable costs of $5,678,700 and fixed costs of$2,192,400.
Required:
1. What is the contribution margin ratio for Sports-Reps based on last year's data? Round your answer to two decimal places. (Express as a decimal-based amount rather than a whole percent.)
What is the break-even point in sales revenue?
2. What was the margin of safety for Sports-Reps last year?
3. One of Sports-Reps's agents proposed that the firm begin cultivating high school sports stars around the nation. This proposal is expected to increase revenue by $230,000 per year, with increased fixed costs of $122,500. Is this proposal a good idea?