# Breakeven point & Margin of safety

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

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