Question

Sheffield Co., a manufacturer of rain barrels, had the following data for 2016. Sales 5,000 units...

Sheffield Co., a manufacturer of rain barrels, had the following data for 2016.
Sales 5,000 units
Sales price $130 per unit
Variable costs $52 per unit
Fixed costs $347,100
What is the contribution margin ratio? (Round answer to 0 decimal places, e.g. 5,275.)
Contribution margin ratio

%

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What is the break-even point in dollars? (Round intermediate calculation and final answers to 0 decimal places, e.g. 5,275.)
Break-even point $

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What is the margin of safety in dollars and as a ratio? (Round ratio to 2 decimal places, e.g. 12.25.)
Margin of safety $

Margin of safety ratio

%

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If the company wishes to increase its total dollar contribution margin by 30% in 2017, by how much will it need to increase its sales if all other factors remain constant? (Round answer to 0 decimal places, e.g. 2,520.)
Total increase in sales required: $

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Answer #1

Contribution margin ratio = (130-52)/130 = 60%

Break even point in dollars = Fixed cost/contribution margin ratio = 347100/0.60 = $578,500

Margin of safety = 5000*130 - 578500 = $71500

Margin of safety ratio = 71500/(5000*130) = 11%

Desired increase in contribution = 5000*130*60%*30% = $117000

Total increase in sales required = 117000/0.60 = $195000

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