Answer:
<em>Contribution margin ratio = Contribution Margin / Sales</em>
= $ 315,000 / $ 525,000
= 0.6 or 60%
Hence, contribution margin at <em>$ 230,000 Sales = </em>Contribution margin ratio * $ 230,000 ( Sales )
= 0.6 * 230,000 = $ 138,000 ( <em>Part A</em> )
Contribution margin at<em> $ 400,000 Sales = </em>0.6 * $ 400,000
= $ 240,000 ( <em>Part B</em> )
<u><em>At Sales level of $ 230,000</em></u>
Sales revenue $ 230,000
- Variable expenses (Sales - Contribution margin) $ 92,000
Contribution Margin ( From Part A ) $ 138,000
- Fixed Expenses $ 172,000
Operating Income / <em>Loss</em> $ (34,000)
<u><em>At Sales level of $ 400,000</em></u>
Sales Revenue $ 400,000
- Variable expenses $ 160,000
Contribution Margin ( From part B ) $ 240,000
- Fixed Expenses $ 172,000
Operating <em>Income</em> / Loss $ 68,000
Explanation:
Refer to the answer.
