Question

Unit sales 20,000 units

Selling price per unit $60 per unit

Variable expenses per unit $45 per unit

Fixed expenses $240,000

CVP Relationships Compute the CM ratio

Selling price per unit Variable expenses per unit =

Contribution margin per unit =

CM ratio =

Compute the break-even

Break-even in unit sales=

Break-even in dollar sales=

Compute the margin of safety

Margin of safety in dollars=

Margin of safety percentage=

Answer 1

	Following are the inputs given:
	Sales(in units)	20,000
	Slling price per unit	$60
	Variable exp per unit	$45
	Fixed Expenses	$240,000
	Sales (In value)- 20000*60	$1,200,000
	Computation of:
1	CM Ratio
	Slling price per unit	$60
	Variable exp per unit	$45
	Contribution margin per unit	$15
	CM Ratio
	(Contribution margin per unit/Selling Price per unit)	25%
	Variable expense ration	75%
2	Break even(BEP)
	In units
	(Fixed cost/contribution margin per unit)	16000
	In Value
	Break even in units * selling price per unit	$960,000
3	Margin of safety(MOS)
	In value
	(sales value - Break even in value)	$240,000
	In Percentage
	MOS in value/Sales value	20%