Homework Answers
( A)
| Breakeven Sales in dollars ( using equation) | $ 300,000 |
Explanation:
1) At break- even point, profit is equal to zero. Equation is as follows:
2) Here, assume sales is equal to X.
= Sales - Variable Cost - Fixed cost = Profit
= 60( X) - 15( X) - $ 225,000 = 0
= 45( X) = $ 225,000
= X = $ 225,000 ÷ 45
X = 5000 Unit
| Breakeven sales dollar = 5000 × $60 sales per unit = $ 300,000 |
( B)
| Break even sales dollar ( using CM ratio) | $ 300,000 |
Explanation:
1) Contribution Per Unit
= Sales Per unit - variable cost per unit
= $ 60 - $15
= $ 45 per unit
2) Contribution Margin Ratio
= CM per unit ÷ Sales
= $45 ÷ $60
= 0.75
3) Breakeven Sales Dollar :
= Fixed Expense ÷ CM Ratio
= $225,000 ÷ 0.75
= $ 300,000
(C)
| Margin of safety | $ 680,000 |
Margin of safety:
= Actual Sales - Breakeven sales
= $ 980,000 - $ 300,000
=$680,000
( D)
| Sales if target income is $,100,000 | $ 433,333.33 |
= ( Fixed expense + Target income ) ÷ CM Ratio
= ( $ 225,000 + $ 100,000 ) ÷ 0.75
= $ 325,000 ÷ 0.75
= $ 433,333.33
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