Concord Company makes radios that sell for $70 each. For the coming year, management expects fixed costs to total $210,000 and variable costs to be $35 per unit.
Compute the break-even point in dollars using the contribution
margin (CM) ratio. (Round answer to 0 decimal places,
e.g. 1,225.)
Break-even point |
= |
Compute the margin of safety ratio assuming actual sales are
$800,000. (Round margin of safety ratio to 2 decimal
places, e.g. 10.51.)
Margin of safety |
Compute the sales dollars required to earn net income of
$875,000.
Required sales |
$ |
Unit Contribution margin | 35 | =70-35 |
Contribution margin (CM) ratio | 50% | =35/70 |
1 | ||
Fixed costs | 210000 | |
Divide by Contribution margin (CM) ratio | 50% | |
Break-even point | 420000 | |
2 | ||
Margin of safety sales | 380000 | =800000-420000 |
Margin of safety ratio | 47.50% | =380000/800000 |
3 | ||
Fixed costs | 210000 | |
Add: Net income | 875000 | |
Required Contribution margin | 1085000 | |
Divide by Contribution margin (CM) ratio | 50% | |
Required sales | 2170000 |
Concord Company makes radios that sell for $70 each. For the coming year, management expects fixed...
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