Question

Felde Bucket Co., a manufacturer of rain barrels, had the following data for 2016.

Sales		2,090	units
Sales price		$55	per unit
Variable costs		$33	per unit
Fixed costs		$22,990

What is the contribution margin ratio?

AND

What is the break-even point in dollars?

AND

What is the margin of safety in dollars and as a ratio?

AND

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 selling price per unit, variable price per unit and total fixed costs remain constant?

Answer 1

Part 1
	Sales Per unit	$                55
	Less:Variable cost per unit	$                33
	Contribution margin per unit	$                22
	Contribution margin ratio($22/$55)	40%
	Fixed Costs	$         22,990
	Break-even sales in units($22,990/$22)	1045	units
	Break-even sales in dollars($22,990/40%)	$         57,475
	Margin of Safety[(2090*$55)-$57,475]	$         57,475
	Margin of Safety($57,475/$114950)	50%
Part 2	Required Contribution Margin[(2090*$22)*1.30]	$         59,774
	Contribution margin per unit	$                22
	No. of units required to be sold($59,774/$22)	2717	units