Question

not change Question 8 3 pts Dr Bob Choppencut performs a certain outpatient procedure for $1000. He has rent of $1,000 per month. He has salary to his receptionist of $2000 per month. Each procedure costs him $500. He also has medical insurance each month of $17000 (he has had a few claims in the past that has increased his premium). He currently plans to do 90 procedures this month. What is his margin of safety in terms of revenue? $40000 $50000 $60000 $100000 Question 9 3 pts A company produces and sells two products at unit contribution margins of $3 and $12 for products A and B respectively. Fixed costs are $24,000. If the planned sales mix is four units of A for each unit of B, the breakeven point would be for A and for B MacBook

Answer 1

8.

Revenue per procedure = $1,000

Variable cost per procedure = $500

Contribution margin per procedure = Revenue per procedure- Variable cost per procedure

= 1,000-500

= $500

Rent per month = $1,000

Salary per month = $2,000

Insurance per month = $17,000

Total fixed cost per month = Rent per month + Salary per month+ Insurance per month

= 1,000+2,000+17,000

= $20,000

Number of procedure = 90

Break even point = Total fixed cost/ Contribution margin per procedure

= 20,000/500

= 40

Margin of safety (units) = Number of procedure- Break even point

= 90-40

= 50

Margin of safety in dollars = Margin of safety (units) x Revenue per procedure

= 50 x 1,000

= $50,000

The margin of safety in terms of revenue = $50000

Second option is correct.

9.

	A	B	Total
Contribution margin per unit (1)	$3	$12
Sales mix (2)	80%	20%
Weighted average contribution margin per unit (1 x 2)	$2.40	$2.40	$4.80

Weighted average contribution margin per unit = $4.80
Number of units at break even = Total fixed cost/ Weighted average contribution margin per unit
= 24,000/4.80
= 5,000
Break even quantity of product A = Number of units at break even x Sales mix proportion of product A
= 5,000 x 80%
= 4,000
Break even quantity of product B = Number of units at break even x Sales mix proportion of product B = 5,000 X 20% = 1,000

The break even point would be 4,000 for A and 1,000 for B.

Kindly comment if you need further assistance.

Thanks‼!