The following information relates to the only product sold by Harper Company.
Sales price per unit | $ | 45 | |
Variable cost per unit | 27 | ||
Fixed costs per year | 262,000 | ||
a. Compute the contribution margin ratio and the
dollar sales volume required to break even.
b. Assuming that the company sells 20,000 units during the current year, compute the margin of safety (in dollars).
Contribution margin=Sales-Variable cost
=(45-27)=18 per unit
Contribution margin ratio=Contribution margin/Sales
(18/45)=40%
Breakeven sales=Fixed cost/Contribution margin ratio
=(262,000/0.4)=$655,000
Total sales=(20,000*$45)=$900,000
Hence margin of safety=Total sales-Breakeven sales
=(900,000-655,000)=$245,000
The following information relates to the only product sold by Harper Company. Sales price per unit...
The following information relates to the only product sold by Harper Company. Sales price per unit $ 45 Variable cost per unit 27 Fixed costs per year 246,000 a. Compute the contribution margin ratio and the dollar sales volume required to break even. b. Assuming that the company sells 20,000 units during the current year, compute the margin of safety (in dollars).
The following information relates to the only product sold by Harper Company. $ 45 Sales price per unit Variable cost per unit Fixed costs per year 27 228,000 a. Compute the contribution margin ratio and the dollar sales volume required to break even. b. Assuming that the company sells 20,000 units during the current year, compute the margin of safety (in dollars). a. Contribution margin ratio Break even sales dollars b. Margin of safety (in dollars)
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