Question

Break-Even Units, Contribution Margin Ratio, Margin of Safety

Khumbu Company's projected profit for the coming year is as follows:

Total |
Per Unit |
|||

Sales | $2,030,000 | $40.00 | ||

Total variable cost | 568,400 | 11.20 | ||

Contribution margin | $ 1,461,600 | $ 28.8 | ||

Total fixed cost | 539,980 | |||

Operating income | $ 921,620 |

**Required:**

**1.** Compute the break-even point in units. If
required, round your answer to nearest whole value.

units

**2.** How many units must be sold to earn a profit
of $240,000? If required, round your answer to nearest whole
value.

units

**3.** Compute the contribution margin ratio. If
required, round your answer to nearest whole number.

%

Using the rounded ratio from above, compute the additional
profit that Khumbu would earn if sales were $160,000 more than
expected.

$

**4.** For the projected level of sales, compute
the margin of safety in units.

units

Answer #1

Break-Even point (units) = Fixed Costs / (Sales price per unit –
Variable costs per unit)

= 539,980 / 28.80 = 18,749 units

2) Quanity = (FC + Profit) / (Sales price per unit – Variable costs
per unit)

Quanity = (539,980 + 240,000) / 28.80 = 27,083 units

3) CM ratio = CM / Sales = 1,461,600 / 2,030,000 * 100 = 72%

Additional profit = Additional sales * CM ratio = 160,000 * 72% =
115,200

4) Margin of safety (in units) = Operating income / CM per
unit

Margin of safety (in units) = 921,620 / 28.80 = 32,001 units

Break-Even Units, Contribution Margin Ratio, Margin of
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Khumbu Company's projected profit for the coming year is as
follows:
Total
Per Unit
Sales
$3,331,250
$41.00
Total variable cost
999,375
12.30
Contribution
margin
$ 2,331,875
$ 28.7
Total fixed cost
1,009,369
Operating income
$ 1,322,506
Required:
1. Compute the break-even point in units. If
required, round your answer to nearest whole value.
units
2. How many units must be sold to earn a profit
of $240,000? If required, round your answer...

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Khumbu Company's
projected profit for the coming year is as follows:
Total
Per Unit
Sales
$3,150,000
$45.00
Total variable cost
819,000
11.70
Contribution
margin
$2,331,000
$ 33.3
Total fixed cost
819,000
Operating income
$1,512,000
Required:
1.
Compute the break-even point in units. If required, round your
answer to nearest whole value.
______ units
2.
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required, round your answer to...

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Total
Per Unit
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Total variable cost
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Contribution
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Total variable cost
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Operating income
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Total variable cost
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Contribution margin
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Jellico Inc.'s projected operating income (based on sales of
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Total variable cost
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Total variable cost
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Break-Even Units, Contribution Margin Ratio, Multiple-Product
Breakeven, Margin of Safety, Degree of Operating Leverage
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Total variable cost
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Contribution margin
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Required:
1(a). Compute variable cost per unit. Enter
your answer to the nearest cent.
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