Question

Morgan Designs manufactures decorative iron railings. In preparing for next year's operations, management has developed the following estimates: Total Per Unit $50.00 Sales (20,000 units) Direct materials $1,000,000 $200,000 $10.00 $50,000 $2.50 Direct labor (variable) Manufacturing overhead: Variable $70,000 $3.50 Fixed $80,000 $4.00 Selling & administrative: Variable $100,000 $5.00 Fixed $30,000 $1.50 Required: a. Unit contribution margin. b. Contribution margin ratio. c. Break-even in dollar sales. d. Margin of safety percentage. e. If the sales volume increases by 20%, with no change in total fixed costs, what will be the change in operating profit? f. If the per unit variable production costs increase by 15%, and fixed selling and administrative costs increase by 12%, what will be the new break-even point in dollar sales?

Answer 1

Contribution margin_ income statement Total per unit $1,000,000 $ 50 sales (20,000 unit) belle variable expenses Direct materials Direct labor Manufacturing variable.overhead Selling sadacin Variable overhead Contribution Llosse fixed expenses Manufacturing overhead Selling 4_admin overhead C$200,000) ($ 50,000). ($70,0002 ($100,000). $ 580,000 ($10) (52-50) ($3:50) ($5.00) $29 C$80,000) (130,000) $ 470,000 Unit a) Contribution margin selling price per unit (-) Variable expenser $ 50 - [10 +2.50 +3.50 + 5.00) $ 50 - $ 21 $29 2 b) Contribution margin ratio Contribution X 100 Sales 58:44 $ 580,000 $1,000,000 c) Breakeren (in $ sales $189,655 fixed expenses Contributin margin %. (+80,000+ $30,000) 58%

d) Margin of safety / Margin of safely_-_x_100 Actual sales (actual sales - Breakeven sales) x 100 Actual sales [31,000,000 - $109,6.55)_* $1,000,000 81-034 100 - e) Operating profit Total fixed [sales volume X Contribution per unit) : [C20,000+ 20:2)_ x $29) - $110,000 [24,001 x_129) - $110,000 $_586,000 As per HomeworkLib quicle lines, I'm allowed to antever_coly first + subparts. However, I'vě answered 5. Please feel free to ask any queries and do give a thumbrup if the Solution was satisfactory_Thank you.