Question

Please answer the following questions using the template provided.

Legrand Company produces hand cream in plastic jars. Each jar sells for $3.40. The variable cost for each jar (materials. labor, and overhead) total $2.55. Total fixed cost is $58,140. During the most recent years, 81,600 jars were sold. 1. What is the break-even point in units for Legrand? What is the margin of safety in units for the most recent year? 2. Prepare an income statement for Legarnd's most recent year. 3. How many units must be sold for Legrand to earn a profit of $25,500? 4. What is the level of sales dollars needed for Legrand to earn operating income of 10% of sales?

Answer 1

Answer:

Requirement 1

Breakeven point in units = Fixed cost / (sales price - variable cost) = 58140 / (3.40 - 2.55 ) = 58140 / 0.85 = 68400 jars

Margin of Safety of Units - Breakeven point in units = 81600 - 68400 = 13200 jars

Requirement 2 Income Statement For the recent year Sales Revenue Variable cost Contribution Margin Fixed Cost Net Income 277440 208080 69360 58140 11220

Requirement 3

Sale units for Target Profit = Fixed cost + Target Profit / (sales price - variable cost) = 58140 + 25500 / 0.85 = 98400 jars

Requirement 4

Sales in dollars =( Fixed cost + Target Profit) / (sales price - variable cost) / sales price

3.40 X =( 58140 + 0.10 x 3.40X ) / (0.85) / 3.40

3.40 X = (58140 + 0.34 X ) / 0.25

0.85 X = 58140 + 0.34 X

0.51 X = 58140 ; X = 114000 jars

Sales = 3.40 x 114000 = $387600