Break-Even Units, Contribution Margin Ratio, Margin of Safety Khumbu Company's projected profit for the coming year...
Break-Even Units, Contribution Margin Ratio, Margin of Safety
Khumbu Company's projected profit for the coming year is as follows:
| Total | Per Unit | |||
| Sales | $1,275,000 | $25.50 | ||
| Total variable cost | 459,000 | 9.18 | ||
| Contribution margin | $ 816,000 | $ 16.32 | ||
| Total fixed cost | 518,670 | |||
| Operating income | $ 297,330 | |||
Required:
1. Compute the break-even point in units. If
required, round your answer to nearest whole value.
units
2. How many units must be sold to earn a profit
of $240,000? If required, round your answer to nearest whole
value.
units
3. Compute the contribution margin ratio. If
required, round your answer to nearest whole number.
%
Using the rounded ratio from above, compute the additional
profit that Khumbu would earn if sales were $160,000 more than
expected.
$
4. For the projected level of sales, compute
the margin of safety in units.
units
Homework Answers
1) Break even unit = Fixed cost/Contribution margin per unit = 518670/16.32 = 31781 units
2) Required unit = (518670+240000)/16.32 = 46487 Units
3) Contribution margin ratio = 16.32/25.50 = 64%
Additional profit = 160000*64% = 102400
4) Margin of safety in units = 50000-31781 = 18219 Units
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Break-Even Units, Contribution Margin Ratio, Margin of
Safety
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