Question

Rossi Incorporated makes track suits that sell for $50 each. Actual sales are $642,500. Management estimates that fixed costs will total $205,600 and variable costs will be $30 per unit this coming year. Calculate the break-even point in sales dollars using the contribution margin ratio. (Round contribution margin ratio to 4 decimal places, e.g. 15.2964% and final answer to 0 decimal places, e.g. 125.) Break-even point in dollars $ Calculate the margin of safety in dollars and the margin of safety ratio. (Round margin of safety in dollars to the nearest whole dollar, e.g. 5,275 and margin of safety ratio to 2 decimal places, e.g. 15.25%.) Margin of safety Margin of safety ratio Calculate the sales dollars required to earn an operating income of $208,000. (Round answer to the nearest whole dollar, e.g. 5,275.) Required sales in dollars

Answer 1

50 Per unit 30 Per unit 205600 642500 20.00 Per unit 40.00% Selling Price Per unit Varaibel Expense Per unit Fixed Expenses Sales Revenue Contribution Margin per unit ( Selling Price - Varible Cost)(50-30) CM Ratio = CM/Selling Price) Compute the Break Even point Brake Even in Dollar sales =( Fixed Cost/ CM ratio) Compute the Margin of Safety Margin of Safety in dollars =(units *selling price -BEP Dollars) Margin of Safety in Percentage =(Margin of safety Dollars/ Actual sales ) Dollars Required t Get operating income of $208,000 Required Sales Dollars (205600+208000)/40% 514000 Dollars 128500 20% 1034000