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 | $3,543,500 | $38.00 | ||

Total variable cost | 1,133,920 | 12.16 | ||

Contribution margin | $ 2,409,580 | $ 25.84 | ||

Total fixed cost | 1,020,528 | |||

Operating income | $ 1,389,052 |

**Required:**

**.** 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

1. Break-even point in units = Total fixed cost / Contribution margin per unit = $1,020,528/$25.84 = 39,494 units

2. Required profit = $240,000

Target contribution margin = Required profit + Fixed costs = $240,000 + $1,020,528 = $1,260,528

Units to be sold = Target contribution margin / Contribution margin per unit = $1,260,528/$25.84 = 48,782 units

3. Contribution margin ratio = Contribution margin / Sales = $ 2,409,580/$3,543,500 = 68%

Additional profit = Additional sales * Contribution margin ratio = $160,000 * 68% = $108,800

4. Margin of safety in units = Operating income / Contribution margin per unit = $ 1,389,052 / $25.84 = $53,755 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
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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
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Total variable cost
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Contribution
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1.
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Operating income
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Total variable cost
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Jellico Inc.'s projected operating income (based on sales of
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Break-Even Units, Contribution Margin Ratio, Multiple-Product
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