Question

please answer #2 a-n

CC 212 Challenge 5 Name: 1) Determine the margin of safety in units or dollars and the margin of safety ratio for the current situation Bl Determine the margin of safety in units or dollars and the margin of safety ratio for Alternative #1. h) Determine the margin of safety in units or dollars and the margin of safety ratio for Alternative #2. i) Determine the margin of safety in units or dollars and the margin of safety ratio for Alternative #3. Determine the volume of sales in both units and dollars to earn income of $225,000 assuming Alternative #1 k) Determine the volume of sales in both units and dollars to earn income of $225,000 assuming Alternative #2. Determine the volume of sales in both units and dollars to earn income of $225,000 assuming Alternative ml if the company maintains the current level of sales (70,000 widgets) which alternative, If any would you choose? Why? n) Would your answer to (m) be the same if the current quantity of widgets sold decreased by 25%? Why???

Answer 1

Answer with working is given below

Current $60.00 Unit Selling price Unit Variable cost Unit contribution margin Contribution margin ratio Fixed period cost Income $48.60 $11.40 19.00% $639,100 $158,900 Alterative #1 Alterative #2 Alterative #3 $60.00 $64.80 $60.00 $47.40 $48.60 $53.46 $12.60 $16.20 $6.54 21.00% 25.00% 10.90% Contribution/Sales *100% $659,100 $830,830 $319,550 $222,900 $303,170 $138,250 Total Sales Variable cost Contribution Fixed cost Net Income $4,200,000 $3,402,000 $798,000 $639,100 $158,900 $4,200,000 $3,318,000 $882,000 $659,100 $222,900 $4,536,000 $3,402,000 $1,134,000 $830,830 $303,170 $4,200,000 $3,742,200 $457,800 $319,550 $138,250 Widgets sold Total contribution (Units * $12.60) Less: Fixed cost Net Income 60,000 $756,000 $659,100 $96,900 b) c) d) e) Breakeven point in units Fixed Cost Contribution per unit 13,150 $639,100 $48.60 13,905 $659,100 $47.40 17,095 $830,830 $48.60 5,977 A/B $319,550 A $53.46 B Breakeven point in $ Fixed Cost Contribution margin ratio $3,363,684 $639,100 19.00% $3,138,571 $659,100 21.00% $3,323,320 $830,830 25.00% $2,931,651 A/B $319,550 A 10.90% B $836,316 $1,061,429 $1,212,680 $1,268,349 A-B f) g) h) i) Margin of Safety Total Sales - Break even sales Total Sales Break even sales $4,200,000 $3,363,684 $4,200,000 $3,138,571 $4,536,000 $3,323,320 $4,200,000 A $2,931,651 B 19.91% 25.27% 26.73% 30.20% Margin of Safety ratio (MOS sales/Total Sales) j) k) 1) Fixed cost Profit Total Target $659,100 $225,000 $884,100 $830,830 $225,000 $1,055,830 $319,550 $225,000 $544,550 Sales in units Total Target Contribution per unit 70,167 $884,100 $12.60 65,175 $1,055,830 $16.20 83,265 A/B $544,550 A $6.54 B Dollar in sales Total Target Contribution margin ratio $4,210,000 $884,100 21.00% $4,223,320 $1,055,830 25.00% $4,995,872 A/B $544,550 A 10.90% B m) Units- 70,000 Unit contribution margin Total Contribution Fixed cost Net profit 70,000 $11.40 $798,000 $639,100 $158,900 70,000 $12.60 $882,000 $659,100 $222,900 70,000 $16.20 $1,134,000 $830,830 $303,170 70,000 $6.54 $457,800 $319,550 $138,250 Alternative 2 is preferred it has highest net income Units - 25% decrease Unit contribution margin Total Contribution Fixed cost Net profit 52,500 $11.40 $598,500 $639,100 -$40,600 52,500 $12.60 $661,500 $659,100 $2,400 52,500 $16.20 $850,500 $830,830 $19,670 52,500 $6.54 $343,350 $319,550 $23,800 Alternative 3 is preferred it has highest net income