Question

6. DEF Company manufactures and sells a single product that sells for $450 per unit; varialble costs are $270. Annual fixed costs are $800,000. The products current break-even point in dollars is $2,000,000 and sales are expected to be $4,000,000. (5 Points) The current margin of safety in dollars is: (5 Points) The current margin of safety percentage is: 7. XYZ Company manufactures and sells a single product that sells for $400 per unit; variable costs are $200. Annual fixed costs are S500,000. The products contribution margin is $200 with a contribution margin ratio of 50% and the target net income is $1,000,000. (5 Points) Compute the dollar sales at target net income: (5 Points) Compute the unit sales at target net income:

Answer 1

6.

Margin of safety=Total sales-Breakeven sales

=(4,000,000-2,000,000)=$2,000,000

Margin of safety %=Margin of safety/Total sales

=(2,000,000/4,000,000)=50%

7.Target contribution margin=Fixed cost+Target income

=(500,000+1,000,000)=$1,500,000

Hence dollar sales required=(1,500,000/0.5)=$3,000,000

Unit sales required=(3,000,000/400)=7500 units.