Question

Rossi Incorporated makes track suits that sell for $50 each. Actual sales are $764,000. Management estimates...

Rossi Incorporated makes track suits that sell for $50 each. Actual sales are $764,000. Management estimates that fixed costs will total $229,200 and variable costs will be $30 per unit this coming year.

(a)

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Calculate the break-even point in sales dollars using the contribution margin ratio. (Round contribution margin ratio to 4 decimal places, e.g. 15.2964% and final answer to 0 decimal places, e.g. 125.)
Break-even point in dollars $

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(b)

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Calculate the margin of safety in dollars and the margin of safety ratio. (Round margin of safety in dollars to the nearest whole dollar, e.g. 5,275 and margin of safety ratio to 2 decimal places, e.g. 15.25%.)
Margin of safety $
Margin of safety ratio %

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(c)

Calculate the sales dollars required to earn an operating income of $209,200. (Round answer to the nearest whole dollar, e.g. 5,275.)
Required sales in dollars $
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Answer #1
Actual sales 764,000
Fixed cost 229,200
desired operating income 209,200
Selling price per unit 50
less variable cost per unit -30
contribution margin per unit 20
Contribution margin ratio 40%
a) Break-even point in dollars 573000
(fixed cost/contribution margin ratio)
b) Margin of safety 191,000
Margin of safety ratio 25%
(margin of safety = actual sales -BEP in dollars)
(margin of safety ratio = margin of safety/actual sales
c) Required sales in dollars 1096000
( requires sales in dollars = (fixed cost+desired operating income)/CM ratio
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