Rainbow Paints operates a chain of retail paint stores. Although the paint is sold under the Rainbow label it is purchased from an independent
paint manufacturer. Guy Walker president of Rainbow Paints is studying the advisability of opening another store. His estimates of monthly
costs for the proposed location are:
Although Rainbow stores sell several different types of paint monthly sales revenue consistently averages $10 per gallon sold.
Compute the contribution margin ratio and the break-even point in dollar sales and in gallons sold for the proposed store.
Walker thinks that the proposed store will sell between 2200 and 2600 gallons of paint per month. Compute the amount of operating income that
would be earned per month at each of these sales volumes.