Question

Problem 2 Cleveland Browns Company is analyzing its CVP relationships for product Football.  Company accountants have accumulated the following monthly information:

	$	Per Unit
Units		50,000
Sales	$ 1,250,000	$      25.00
Variable Costs	600,000	$      12.00
Contribution Margin	650,000	$      13.00
Fixed Costs	481,000
Net Income	$    169,000

Fill in the following table.  Show your work and highlight your answer for each item.

Break-Even Sales in Units: (Whole Units)	Margin of Safety, Units: (Whole Units)		Margin of Safety, Percentage (%): (0.000%)
Break-Even Sales in Dollars ($): ($0.00)	Margin of Safety, Dollars ($): ($0.00)		Operating Leverage: (0.00)
Sales in whole units necessary to achieve a minimum of $180,000 of Net Income per month. (Whole Units)		Sales in dollars ($) necessary to achieve a minimum of $180,000 of Net Income per month. ($0.00)

Answer 1

1-	Break even sales in units	total of fixed cost/contribution margin per unit	481000/(25-12)	37000
2-	Break even sales in dollar	total of fixed cost/contribution margin per ratio	481000/.52	925000
	contribution margin ratio	13/25	0.52
3-	Sales in whole units necessary to achieve a minimum of $180,000 of Net Income per month.	(target profit+total of fixed cost)/contribution margin per unit	(481000+180000)/(25-12)	50846
4-	Sales in dollars ($) necessary to achieve a minimum of $180,000 of Net Income per month.	(target profit+total of fixed cost)/contribution margin ratio	(481000+180000)/.52	1271154
5-	Margin of Safety, Units: (Whole Units)	ACTUAL SALES IN UNITS-BREAK EVEN SALES IN UNITS	50000-37000	13000
6-	Margin of Safety, DOLLARS: (Whole Units)	ACTUAL SALES IN DOLLAR-BREAK EVEN SALES IN DOLLARS	(1250000-925000)	325000
7-	MARGIN OF SAFETY IN %	MARGIN OF SAFETY IN DOLLAR/CURRENT SALES LEVEL	325000/1250000	26.00%
8-	DOL	CONTRIBUTION/EBIT	650000/169000	3.85