Question

Required information Use the following information for the Exercises below. (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 (10,900 units at $225 each) Variable costs (10,900 units at $180 each) Contribution margin Fixed costs Pretax income $2,452,500 1,962,000 490, 500 387.000 $ 103,500 Exercise 18-17 Target income and margin of safety (in dollars) LO C2 1. Assume Hudson Co. has a target pretax income of $159,000 for 2020. What amount of sales (in dollars) is needed to produce this target income? 2. If Hudson achieves its target pretax income for 2020, what is its margin of safety (in percent)? (Round your answer to 1 decimal place.) 11 Amount of sales 2. Margin of safety

Answer 1

Target Pretax Income	159,000		Sales Price	225.00
Add: Fixed Cost	387,000		Less: Variable Cost	180.00
Total Required Contribution	546,000		Contribution margin	45.00
Contribution margin Ratio	20.00%		Contribution margin Ratio	20.00%	(45/225)
Amount of Sales Required	2,730,000	(546000/20%)
Break Even Sales:
Fixed Cost	387,000
Contribution margin Ratio	20.00%
Break Even Sales	1,935,000	(387000/20%)
Margin of Safety:
(Actual Sales-Break Even Sales)/Actual Sales
(2730000-1935000)/2730000*100
29.1%