Question

lowing formation o r its first year of sales. Sales were $1,200,000 on 100,000 units, selling expenses 210.000 (40% vanaand o f direct mate 2.000, direct labor $21,009, administrative expenses $276,000 (20% variable and 80% ved and manufacturing overhead 354,000 (70% variable and fed). Top management has asked you de a CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by 10 exte Your answer is correct Compute (1) the contribution margin for the current year and the projected year, and (2) the fixed costs for the current year (Asume that fed costs will remain the same in the projected year) (1) Contribution margin for current year J00000 Contribution margin for projected year (2) Fred Costs Your answer is correct Compute the break-even point in units and sales llars for the current Break-even point in 151000 units Break-even point in dollars 1812000 Your is correct The company has a target net income of $200,000. What is the required sales Sales dollars red for target et income 12000 dollars for the company to start

Answer 1

Ans.

Margin of safety ratio = (Sales dollars required for target net income - Break even point in dollars) / Sales dollars required for target net income * 100

= ($2,612,000 - $1,812,000) / $2,612,000 * 100

= $800,000 / $2,612,000 * 100

= 30.6%