Question

2.

Shelhorse Corporation produces and sells a single product. Data concerning that product appear below:

	Per Unit			Percent of Sales
Selling price	$	170			100	%
Variable expenses		68			40	%
Contribution margin	$	102			60	%

Fixed expenses are $346,000 per month. The company is currently selling 4100 units per month.

Required:

Calculate the Following:
Contribution Margin Ratio:	%
Break Even point in Sales Dollars (rounded to the whole dollar)	$
Margin of Safety in Units (nearest whole units)	Units

Answer 1

	Calculate the following:
Ans	Contribution Margin Ratio	60%
	Break Even point in Sales Dollars
	Formula = Break even in dollars = Fixed cost/Contribution margin ratio
	Contribution Margin Ratio (A)	60%
	Fixed cost (B)	$346,000
Ans	Break Even point in Sales Dollars (C=B/A)= $346,000/60%	$576,667
	Margin of Safety in Units
	Formula = Margin of safety = Total sales units - break even sales
	Break even sales in units (A)= $576,667/$170	$3,392
	Total sales (B)	$4,100
Ans	Margin of safety (B-A)	$708