Question

I
Question 5 of 5 View Policies Show Attempt History Current Attempt in Progress Sheridan Bucket Co., a manufacturer of rain barrels, had the following data for 2019. Sales Sales price Variable costs 2,080 units $60 per unit $42 per unit $18,720 Fixed costs

Answer 1

Answer of Part c:

Contribution Margin per unit = Sales per unit – Variable Cost per unit
Contribution Margin per unit = $60 - $42
Contribution Margin per unit = $18

Contribution Margin Ratio = Contribution Margin per unit / Sales per unit
Contribution Margin Ratio = $18 / $60
Contribution Margin Ratio = 0.3 or 30%

Break Even Sales in Dollar = Fixed Costs / Contribution margin ratio
Break Even Sales in Dollar = $18,720 / 0.3
Break Even Sales in Dollar = $62,400

Actual Sales = 2,080 * $60
Actual Sales = $124,800

Margin of Safety = Actual Sales – Break Even Sales
Margin of Safety = $124,800 - $62,400
Margin of Safety = $62,400

Margin of Safety Ratio = Margin of Safety / Actual Sales *100
Margin of Safety Ratio = $62,400 / $124,800 *100
Margin of Safety Ratio = 50%

Answer of Part d:

Contribution Required = (Contribution Margin per unit * no. of unit) * 1.3
Contribution Required = ($18 * 2,080)*1.3
Contribution Required = $48,672

Total Sales Required = Contribution required / Contribution Margin ratio
Total Sales Required = $48,672 / 0.3
Total Sales Required = $162,240

Total increase in Sales Required = Total Sales Required – Actual Sales
Total increase in Sales Required = $162,240 - $124,800
Total increase in Sales Required = $37,440