Question

Required information Problem 3-23A Comprehensive CVP analysis LO 3-3, 3-4, 3-5 [The following information applies to the questions displayed below.] Benson Company makes and sells products with variable costs of $41 each. Benson incurs annual fixed costs of $27.300. The current sales price is $62. Problem 3-23A Part a Required The following requirements are interdependent. For example, the $6,300 desired profit introduced in Requirement calso applies to subsequent requirements. Likewise, the $53 sales price introduced in Requirement d applies to the subsequent requirements. a. Determine the contribution margin per unit. Contribution margin per 5 21 unit b. Determine the break-even point in units and in dollars. Prepare an income statement using the contribution margin format. Complete this question by entering your answers in the tabs below. Required B1 Required B2 Determine the break-even point in units and in dollars. Break-even point in units Break-even point in dollars 1,300 80,600 $ Required B1 Required B2 > b. Determine the break-even point in units and in dollars. Prepare an income statement using the contribution margin format Complete this question by entering your answers in the tabs below. Required B1 Required B2 Prepare an income statement using the contribution margin format. BENSON COMPANY Income Statement Sales $ 80,600 1 Variable cost Contribution margin Fixed cost ($ 5 3,300 27,300 27,300 Net income (Required B1 Required B2)

Answer 1

f. Contribution margin per unit = $53 - $33 = $20

Sales volume in units = Fixed cost + Desired profit / Contribution margin per unit

= $20,100 + $6,300 / $20

= $26,400 / $20

= 1,320 units

Sales volume in dollars = 1,320 X $53 = $69,960

g.

BENSON COMPANY
Income statement
Sales ($53 X 1,320)	$69,960
Less : Variable cost ($33 X 1,320)	($43,560)
Contribution margin	$26,400
Less : Fixed cost	($20,100)
Net income	$6,300

h. Break-even point in units = $20,100 / $20 = 1005 units

Break-even point in dollars = 1005 X $53 = $53,265

Expected sales in units = 1,450 units

expected sales in dollars = $53 X 1,450 = $76,850

==> Margin of safety in units = 1,450 - 1005 = 445 units (Expected - Break-even)

==> Margin of safety in dollars = $76,850 - $53,265 = $23,585 (Expected - Break-even)

==> Margin of safety (%) = (Expected sales - Break-even sales) / Expected sales X 100

= $23,585 / $76,850 X 100

= 30.69 %