Question

Zhao Co. has fixed costs of $245,000. Its single product sells for $155 per unit, and variable costs are $106 per unit. If the company expects sales of 10,000 units, compute its margin of safety in dollars and as a percent of expected sales. Dollars Percent Margin of safety %

Answer 1

Break even Fixed Cost /(Selling price - Variable cost) $ 2,45,000 /($ 155 - $ 106) $ 2,45,000 / $ 49 5,000 units Margin of Safety = (10,000 - 5,000) x $ 155 5,000 x $ 155 $ 7,75,000 = Margin of Safety (%) = = Margin of Safe/ Actual Sales x 100 $ 7,75,000 / $ 15,50,000 x 100 50% Dollars $ 7,75,000 Percent 50% Margin of Safety US-Mobile Determine the break-even point in composite units Choose Numerator: / Choose Denominator : Break Even Units Fixed Costs / Contribution Margin Break Even Units $ 90,860 / $ 118 770 units Determine the number of units of each product that will be sold at the break even point Number of composite units Unit sales at break-even Quantity to break even point Table Computers 4 770 x 4/6 513 Smartphones 2 770 x 2/6 257 Total units 770

Harrison Co. HARRISON CO. Forecasted Contribution Margin Income Statement Units $ per unit Sales 190000 $ 84 $ less: Variable cost 190000 $ 58 $ Contribution Margin $ 26 $ less: Fixed Cost $ Pre Tax Income $ 1,59,60,000 1,10,20,000 49,40,000 37,00,000 12,40,000 Note: Sales per unit = $ 15960000 / 190000 = Variable Cost per unit = $ 84 - $ 26 = $ $ 84 58 Contribution Margin ($26 x 190000) Less: Pre tax Income Fixed Cost $ 49,40,000 $ 12,40,000 $ 37,00,000

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