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Breakeven point & Margin of safety

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Breakeven point & Margin of safety

Breakeven point & Margin of safety

1.

Last month when Harrison Creations, Inc., sold 40,000 units, total sales were $300,000, total variable expenses were $240,000, and fixed expenses were $45,000.
Required:
a. What is the company s contribution margin (CM) ratio?
b. Estimate the change in the company s net operating income if it were to increase its total sales by $1,500.

2.

[The following information applies to the questions displayed below.]

Maxson Products distributes a single product, a woven basket whose selling price is $8 and whose variable cost is $6 per unit. The company s monthly fixed expense is $5,500.

Required:
a. Compute for the company s break-even point in unit sales using the equation method.

b.Compute for the company s break-even point in sales dollars using the equation method and the CM ratio.(Do not round intermediate calculations.Round your CM ratio to 2 decimal places.)

CM ratio______________________

Break-even point in dollar sales________________________________
4.

Mohan Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning next month s budget appear below:
Selling price

$25

 per unit
Variable expenses

$15

 per unit
Fixed expenses

$8,500

 per month
Unit sales

1,000

 units per month
Required:
a. Compute the company s margin of safety.

b. Compute the company s margin of safety as a percentage of its sales. (%)

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