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Submitted by accountguru on Mon, 2013-09-16 03:30
due on Fri, 2013-09-20 03:18
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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 03:31
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Breakeven point & Margin of safety

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x

Last xxxxx xxxx Harrison xxxxxxxxxx xxxxx sold 40,000 xxxxxx xxxxx xxxxx were $300,000, total xxxxxxxx xxxxxxxx xxxx $240,000, and fixed xxxxxxxx were $45,000.

  

xxxx

xxxxxxxxx

xx

xxxx xx the xxxxxxx’x xxxxxxxxxxxx margin xxxx xxxxxx

xx

Estimate xxx xxxxxx xx the xxxxxxx’s xxx xxxxxxxxx xxxxxx xx xx xxxx to xxxxxxxx its xxxxx xxxxx by $1,500.

xxxxxxxx

xxxx is the Company’s xxxxxxxxxxxx xxxxxx xxxxx

xxxxxxxxxxxx Margin xxxxxx = Contribution / Sales

= xxxxxxxx – 2,40,000) x 300,000

x xxx

xxxxxxxx the xxxxxx xx the company’s xxx xxxxxxxxx xxxxxx xx xx were xx xxxxxxxx its total xxxxx xx $1,500.

xxxxxx xx xxxxxxx’s xxx operating Income x Increase in xxxxx x xxxxxxxxxxxx Margin xxxxx

x xxxxxx x 20%

= xxxx

xxxx following xxxxxxxxxxx applies xx the xxxxxxxxx xxxxxxxxx xxxxxxx

x

Maxson Products xxxxxxxxxxx x single xxxxxxxx a xxxxx basket whose xxxxxxx price xx xx and xxxxx variable xxxx xx xx per unit. The company’x monthly xxxxx expense xx $5,500.

x

xxxxxxxxx

xx

xxxxxxx xxx xxx xxxxxxx’x break-even point in unit sales xxxxx xxx xxxxxxxx

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