Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
Sales | $ | 75,000 |
Variable expenses | 45,000 | |
Contribution margin | 30,000 | |
Fixed expenses | 22,800 | |
Net operating income | $ | 7,200 |
9.What is the break-even point in dollar sales?
10. How many units must be sold to achieve a target profit of $18,000?
11. What is the margin of safety in dollars? What is the margin of safety percentage?
12. What is the degree of operating leverage? (Round your answer to 2 decimal places.)
A |
Contribution margin |
$30,000 |
B |
Sales |
$75,000 |
C = (A/B) x 100 |
CM Ratio |
40% |
D |
Fixed Expenses |
$22,800 |
E = D/E |
Break even point in dollar sales |
$57,000 |
A |
Target profits |
$18,000 |
B |
Fixed Expenses |
$22,800 |
C = A+B |
Total contribution margin required |
$40,800 |
D = $ 30000 / 1000 units |
Contribution margin per unit |
$30 |
E = C/D |
No. of units required to be sold |
1360 |
A |
Total Sales |
$75,000 |
B |
Break even point in dollar sales |
$57,000 |
C = A - B |
Margin of Safety in dollars |
$18,000 |
D = (C/A) x 100 |
Margin of Safety % |
24% |
A |
Contribution margin |
$30,000 |
B |
Net Operating income |
$7,200 |
C = A/B |
Degree of Operating leverage |
4.17 |
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