Question

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000...

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.)

Homework Answers

Answer #1
  • Requirement 9 to 12, all with workings and calculations

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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