Question

Format Painte Clipboard Alignment AALS : X for Bc - Unit Cost Volume Profit Read Chapter 18 Problem 2 Jefff Fargo owns Fargo Quick Lube and Oil. Jeff wants to know what his monthly break even sales are and what is Margin of Safety Ratio is. On average Fargo's Quick Lube performs 950 total services at an average cost of $50 each. Monthly Fixed costs are 11,200 El 21 Variable costs were 60% of sales 1 Calculate the contribution margin 2 Calculate the contribution margin ratio 3 Calculate the break even in units and in sales $ 4 Prepare a CVP Income Statement 5 Calculate the margin of safety Comment on Fargos's profitablity given the information that you 6 have calculated Per Unit 22 28 Units Sales Variable Costs Contribution margin 2 Contribution Margin Ratio CM'sales 3 Break Even in Units 8 Fixed Costs Contribution Margin per unit Break even in Sales Fixed Costs Contribution Margin ratio Resources Problem Problem 2 Problem 3 Problem 4

Answer 1

Sl. No.	Particulars	Formula	Amount
a.	Total sales in amount		$ 47,500.00
b.	Fixed Costs		$ 11,200.00
c.	Variable cost as % on sales		60%
d.	Variable cost amount	a x b	$ 28,500.00
e.	Contribution Margin	a - d	$ 19,000.00
f.	Contribution per unit	e/950 units	$       20.00
g.	Break Even in units	b/f	560
h.	Contribution Margin ratio	e/a	40.00%
i.	Break Even in sales	b/h	$ 28,000.00

CVP INCOME STATEMENT
Particulars	Amount
Sales	$                        47,500.00
Variable Costs	$                        28,500.00
Contribution Margin	$                        19,000.00
Fixed Costs	$                        11,200.00
Net Income	$                          7,800.00

Margin of Safety %
Particulars	Amount
Actual Sales	$ 47,500.00
Break even sales	$ 28,000.00
Margin of Safety sales	$ 19,500.00
Margin of safety ratio	41.05%