Question

Computer Accessories Pro Forma Contribution Margin For the year ending December 31, 2019 Second First Quarter Quarter $352,000 $286,000 Fourth Third Quarter Quarter $319,000 $440,000 Annual Total $1,397,000 Sales Revenue Less Variable Costs: Cost of Goods sold Selling and Administrative expenses Total Variable costs $249,600 $19,200 $268,800 $202,800 $15,600 $218,400 $226,200 $17,400 $243,600 $24,000 $336,000 $990,600 $76,200 $1,066,800 Contribution margin $83,200 $67,600 $75,400 $104,000 $330,200 Less Fixed Costs: Manufacturing Overhead Selling and Administrative Expenses Total Fixed Costs Net Income $40,000 $25,000 $65,000 $18,200 $40,000 $25,000 $65,000 $2,600 $40,000 $25,000 $65,000 $10,400 $40,000 $25,000 $65,000 $39,000 $40,000 $25,000 $65,000 $265,200 Compute the annual contribution margin, the breakeven in dollars for the year, and the margin of safety in dollars for the year. Comment on your results. 24% Contribution margin ratio Breakeven in Dollars $0.20 Margin of Safety in Sales Dollars Comment on your results.

Answer 1

Contribution margin ratio = Contribution margin / Sales * 100

= $330,200 / $1,397,000 * 100

= 23.64%

Break-even in dollars = Fixed costs / Contribution margin ratio

= $260,000 / 23.64%

= $1,099,831

Margin of safety in dollars = Sales - Break-even sales

= $1,397,000 - $1,099,831

= $297,169

The annual total for Manufacturing overhead is $160,000 and Selling and administrative expenses is $100,000 and the total fixed expenses for the year comes to $260,000

While there is no profit and no loss at sales of $1,099,831, the sales about the break-even is $297,169.