The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. If...
The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. If Burkett Corporation is able to achieve the budgeted level of sales, its margin of safety in dollars would be (Do not round intermediate calculations.):
Sales (58,000 units) $986,000
Costs: Direct materials $149,200
Direct labor 240,800
Fixed factory overhead 104,000
Variable factory overhead 150,800
Fixed marketing costs 110,800
Variable marketing costs 50,800 806,400
Pretax income $179,600.
Homework Answers
Answer = $449,000
Margin of Safety = Actual dollar Sales - BEP Dollar Sales
Actual Dollar Sales = 986,000
BEP Dollar Sales = Fixed Cost / CM ratio
CM Ratio = Contribution Margin / Sales Revenue
Contribution Margin = Sales - Variable cost = 986,000-149200-240800-150800-50,800 = 394,400
CM Ratio = 394,400/986,000 = 40%
Break Even Dollars = (104,000+110,800)/40% =214,800 /40%= 537,000
Margin of Safety = 986,000-537,000 = $ 449,000 (Answer)
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