Question

Dana's Ribbon World makes award rosettes. Following is information about the company: Variable cost per rosette Sales price per rosette Total fixed costs per month $1.60 4.00 200.00 Required 1. Suppose Dana's would like to generate a profit of $920. Determine how many rosettes it must sell to achieve this target profit. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.) et Units 2. If Dana's sells 870 rosettes, compute its margin of safety in units, in sales dollars, and as a percentage of sales. (Round your Margin of Safety percentage to two decimal places (i.e. .1234 should be entered as 12.34%). Margin of Safety (Units) Margin of Safety in Dollars Percentage of Sales Rosettes

Answer 1

2 Selling price per month 3 Less: Variable Cost per Unit $ 4 Contribution Margin Per unit $ 4.00 1.60 2.40 6 Fixed Cost per month $ 1,200.00 81. To generate a profit of $920 9 10 Desired Profit 920.00 Fixed Cost + Desired Profit Contribution Margin Per Unit 12 13 Sales 14 (B10+B6) B4 883.33 Units Fixed Cost Break Even Sales Units - 16 17 18 Break Even Sales Units 19 20 2.Margin of Safety (Units)- Current Sales 21 Margin of Safety (Units)-970-C18 Contribution Margin Per Unit 500 Units Break Even Sales 470 Units 23 Margin of Safety in Dollars - Units X Selling Price per Unit 24 Margin of Safety in Dollars -C21 B2 25 26 Percentage of Sales = 27 28 Percentage of Sales $1,880.00 Margin of Safety UNITS Current Sales Units -C21/970 48%

1 3.If No.of units sold 870 Income Statement 3 Sales 4 Less: Variable Cost 5 Contribution Margin 6 Less: Fixed Cost 7 Earnings Before Income and Taxes $3,480.00 $1,392.00 $2,088.00 $1,200.00 888.00 Contribution Margin 9 Operating Leverage Earnings Before Income and Taxes 10 12 Operating Leverage 13 14 4.If No.of units sold 696 15 16 Sales 17 Less: Variable Cost 18 Contribution Mar 19 Less: Fixed Cost 20 Earnings Before Income and Taxes | $ 470.40 | 21 -G5/G7 2.35 Income Statement $2,784.00 $1,113.60 $1,670.40 $1,200.00 (G7-G20)/G20 89%