Break even point in dollars using the contribution margin ratio | |||||||
Sale price per unit | =$40 | ||||||
Variable cost per unit | =$32 | ||||||
Contribution Margin | = Sales- Variable cost | ||||||
=$40-$32 | |||||||
=$8 | |||||||
Contribution Margin Ratio = | Sales- Variable cost | ||||||
Sales | |||||||
= | $40-$32 | ||||||
$40 | |||||||
= | 20% | ||||||
Break-even point in dollar = | Fixed Cost | X 100 | |||||
Contribution Margin Ratio | |||||||
= | $102,340 | X 100 | |||||
20 | |||||||
= | $511,700 | ||||||
Margin of safety Ratio | |||||||
Margin of safety (%) = | Actual sales-Break even sales | X 100 | |||||
Actual sales | |||||||
= | $700,000- $511,700 | X 100 | |||||
$700,000 | |||||||
= | 26.90% | ||||||
Sales dollar required to earn net income of $169,660 | |||||||
Required sales in dollar = | Fixed Cost +Target Income | ||||||
Contribution Margin Ratio | |||||||
= | $102,340+$169,660 | ||||||
20% | |||||||
= | $272,000 | ||||||
20% | |||||||
= | $1,360,000 |
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