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Submitted by accountguru on Mon, 2013-09-16 02:30
due on Fri, 2013-09-20 02:18
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ACCT640 - Chapter 3 -...

Breakeven point & Margin of safety



 

1.    

Last month when Harrison Creations, Inc., sold 40,000 units, total sales were $300,000, total variable expenses were $240,000, and fixed expenses were $45,000.

  

Required:

a.

What is the company’s contribution margin (CM) ratio?

b.

Estimate the change in the company’s net operating income if it were to increase its total sales by $1,500.

 

 

                                                   

2.     

[The following information applies to the questions displayed below.]

Maxson Products distributes a single product, a woven basket whose selling price is $8 and whose variable cost is $6 per unit. The company’s monthly fixed expense is $5,500.

Required:

a.

Compute for the company’s break-even point in unit sales using the equation method.

b. Compute for the company’s break-even point in sales dollars using the equation method and the CM ratio. (Do not round intermediate calculations. Round your CM ratio to 2 decimal places.)

 

CM ratio______________________

 

Break-even point in dollar sales________________________________

 

 

 

 

 

 
   

4.    

Mohan Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning next month’s budget appear below:

 

 

 

 

  Selling price

$25

 per unit

  Variable expenses

$15

 per unit

  Fixed expenses

$8,500

 per month

  Unit sales

1,000

 units per month


 

Required:

a.

Compute the company’s margin of safety.

b. Compute the company’s margin of safety as a percentage of its sales. (%)

 

 

 

 

 

 

 

Answer
Submitted by accountguru on Mon, 2013-09-16 02:31
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Breakeven point & Margin of safety

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x

xxxx month when xxxxxxxx xxxxxxxxxx Inc., sold 40,000 units, xxxxx xxxxx were $300,000, total variable expenses were $240,000, xxx fixed xxxxxxxx xxxx xxxxxxxx

  

xxx

xxxxxxxxx

a.

What xx xxx company’s contribution margin xxxx ratio?

xx

xxxxxxxx xxx xxxxxx xx the company’s net operating xxxxxx xx it xxxx to increase xxx total sales by xxxxxxx

Solution

xxxx is the Company’s Contribution xxxxxx Ratio

Contribution Margin xxxxxx = Contribution x Sales

= xxxxxxxx – xxxxxxxxx / xxxxxxx

= xxx

xxxxxxxx xxx xxxxxx in xxx xxxxxxx’s xxx operating income xx xx were xx xxxxxxxx its xxxxx xxxxx by xxxxxxx

Change in Company’s net operating xxxxxx x Increase in sales x xxxxxxxxxxxx xxxxxx Ratio

x xxxxxx x 20%

x $300

[The xxxxxxxxx xxxxxxxxxxx xxxxxxx to xxx xxxxxxxxx displayed below.]

Maxson Products xxxxxxxxxxx x xxxxxx product, x xxxxx xxxxxx xxxxx xxxxxxx xxxxx xx xx xxx xxxxx xxxxxxxx cost is xx per unit. The company’s monthly xxxxx xxxxxxx xx $5,500.

xx

Required:

a.

Compute for the company’s break-even point xx unit xxxxx xxxxx the xxxxxxxx

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