Breakeven point & Margin of safety

profile
accountguru
Rated 590 times
  • Field: Business Finance - Accounting
  • Posted: 4 years ago


 

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. (%)

 

 

 

 

 

 

 

    Breakeven point & Margin of safety

    Purchase the answer to view it

    blurred-text