Question

Do It! Review 5-5 Cullumber Company makes radios that sell for $30 each. For the coming year, management expects fixed costs to total $181,770 and variable costs to be $21 per unit. Compute the break-even point in dollars using the contribution margin (CM) ratio. Break-even point LINK TO TEXT LINK TO TEXT Compute the margin of safety ratio assuming actual sales are $830,000. (Round margin of safety ratio to 2 decimal places, e.g. 10.50.) Margin of safety LINK TO TEXT LINK TO TEXT Compute the sales dollars required to earn net income of $124,230. Required sales s Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT LINK TO TEXT

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Answer 1

1)	Break even point	=	Fixed cost	/	CM Ratio
		=	$    1,81,770.00	/	30.00%
		=	$          6,05,900
	Working:
	CM Ratio	=	(Selling price per unit - Variable cost per unit)/Selling price per unit
		=	(30-21)/30
		=	30.00%
2)	Margin of safety ratio	=	Margin of safety sales	/	Actual sales
		=	$    2,24,100.00	/	$ 8,30,000.00
		=	27.00%
	Working:
	Margin of safety sales	=	Actual Sales	-	Break even sales
		=	$    8,30,000.00	-	$       6,05,900
		=	$    2,24,100.00
3)	Target Sales dollar	=	Target contribution margin	/	CM Ratio
		=	$    3,06,000.00	/	30.00%
		=	$ 10,20,000.00
	Working:
	Target contribution margin	=	Fixed Costs	+	Target net income
		=	$    1,81,770.00	+	$ 1,24,230.00
		=	$    3,06,000.00