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Sales in units = $764,000 / $50 = 15,280
(a) Contribution margin = Selling price per unit - Variable costs per unit
= $50 - $30
= $20
Contribution margin ratio = Contribution margin / Sales * 100
= $20 / $50 * 100
= 40%
Break-even point in sales dollars = Fixed costs / Contribution margin ratio
= $229,200 / 40%
= $573,000
(b)
Margin of safety = Sales - Break even sales
= $764,000 - $573,000
= $191,000
Margin of safety ratio = Margin of safety / Sales * 100
= $191,000 / $764,000 * 100
= 25%
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