Question

Required information [The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (11,300 units at $175 each) Variable costs (11,300 units at $140 each) Contribution margin Fixed costs Pretax income .. $1,977,500 1,582,000 395,500 315,000 $ 80,500

Answer 1

1. Break even point in unit = fixed cost / contribution per unit

= 315,000 / 35

= 9,000 units

2. Break even point in sales dollar = break even in unit x selling price per unit

= 9,000 x 175

= 1,575,000

1. sale for target income = fixed cost + target income / contribution margin per unit

= 315,000 + 155,000 / 35

= 13,429 units

amount of sale = 13,429 x 175 = 2,350,075

2. Margin of safety = actual sale - break even sale / actual sale x 100

= 2,350,075 - 1,575,000 / 2,350,075 x 100

= 32.98%