College Calendars imprints calendars with college names. The company has fixed expenses of $1,115,000 each month plus variable expenses of $6.00 per carton of calendars. Of the variable expense, 67% in Cost of Goods Sold, while the remaining 33% related to variable operating expenses. College Calendars sells each carton of calendars for $18.50.
Requirements
1. Compute the number of cartons of calendars that College Calendars must sell each month to break even.
2. Compute the dollar amount of monthly sales College Calendars needs in order to earn $330,000 in operating income (round the contribution margin ratio to two decimal places).
3. Prepare College Calendar's contribution margin income statement for June for sales of 455,000 cartons of calendars.
4. What is June's margin of safety (in dollars)? What is the operating leverage factor at this level of sales?
5. By what percentage will operating income change if July's sales volume is 11% higher? Prove your answer.