Question

The section of Waterways that produces controllers for the company provided the following information.

Sales in units for month of February		4,100
Variable manufacturing cost per unit		$9.00
Sales price per unit		$42.00
Fixed manufacturing overhead cost (per month for controllers)		$80,000
Variable selling and administrative expenses per unit		$3.60
Fixed selling and administrative expenses (per month for controllers)		$12,400

Using this information for the controllers, determine the contribution margin ratio, the degree of operating leverage, the break-even point in dollars, and the margin of safety ratio for Waterways Corporation on this product.

Contribution Margin Ratio (Round to 0 decimal places, e.g. 25%.)			%
Degree of Operating Leverage (Round to 2 decimal places, e.g. 5.25.)
Break-even Point in Dollars		$
Margin of Safety Ratio (Round to 1 decimal place, e.g. 5.2%.)			%

Answer 1

Sales (4100 units x $42.00) $ 172200 vanable monutachuring cost (4100 x $9.00) ($36900) variable selling ($141760) & Administrative £ Exposses (4100 x $3.60) contribution margin $120540 (-) Fixed cost ($92400) [$80,000+ $12,400) $281410 EBOT a) contribution margin Ratio X100 contribution margin Radio . contribution marg margin sales $120540 X100 $12200 70%

Degree of operating leverage Degree of operating = leverage contribution margin EBIT $ 120540 = 4.2835 $28140 = 4.28 c) Break Even point in dollon Break Even point = Fixed cost .Contobukion Margin rako $ 92400 $132000 70 % d) Margin of safety vako raho Margin of safety Actual sales. Break Even Pointsales ratio X 100 Actual sales - $172200 - $132000 X 100 $2200 23.34.1
marigin of safety ratio is 23.3% (rounded to one decimal)