Answer:
The following is an income statement using the Contribution format.
...........................Income Statement for Rivieremia Corp................................
Sales ........................................................................$1,500,000
Less Variable Costs................................................<u>($1,200,000)</u>
Contribution Margin..............................................$300,000
Less Fixed Costs....................................................<u>($200,000)</u>
Operating Income .................................................$100,000
Less Tax...................................................................<u>.($10,000)</u>
Net Income...............................................................$90,000
Tax = 10% * 100,000 = $10,000
Proving breakeven is $1,000,000.
The breakeven point for a company can be calculated by dividing the Fixed cost by the contribution margin ratio.
Contribution margin ratio = Contribution margin / Sales
= 300,000/1,500,000
= 20%
= Fixed Cost/ Contribution Margin ratio
= 200,000/20%
= $1,000,000
Degree of Operating Leverage = Contribution Margin/ Operating Income
= 300,000/100,000
= 3
