Question

need hwlp with question 12

TILL " Ultra 2012 =40 S2 A 31,000 Regular units and 31,000 Ultra units. BY 31,000 Regular units and 62,000 Ultra units. C) 10,333 Regular units and 20,667 Ultra units. D) 36,167 Regular units and 72,333 Ultra units. E) 62,000 Regular units and 31.000 Ultra units. -= 1612,000 -- co Resular = 31,000 Ultra = 2.31k- 11) Flannigan Company manufactures and sells a single product that sells for SASO per unit, variable costs are $270. Annual fixed costs are $800.000. Current sales volume is $4,200,000, Flannigan Company management targets an annual pre-tax income of $1,125,000. Compute the unit sales to earn the target pre-tax net income. A) 4,444. B) 7,500. C) 6,650. D) 10,694. E) 11,750. 12) Flannigan Company manufactures and sells a single product that sells for $450 per unit, variable costs are $270. Annual fixed costs are $800.000. Current sales volume is $4,200,000. Compute the current margin of safety in dollars for Flannigan Company. A) $1,560,000. B) $2,000,000. C) $2,200,000. D) $2,895,652 E) $2,460,000. (13)At Midland Company's break-even point of 120,000 units, fixed costs are $2,400,000 and variable costs are $4,200,000 in total. The unit sales price is: A) $25. B) $35. C) $55. D) $75. E) $95.

Answer 1

1. Formula for margin of safety is Actual sales - Break even sales. So in order to compute Margin of safety we shall calculate break even sales.
   1. Break even sales = Fixed costs÷ Contribution ratio
      1. Contribution ratio = (Selling price - variable cost)÷selling price = (450-270)÷450 = 40%
   2. Therefore break even sales = 800000÷40% = 2,000,000
2. Margin of safety = 4,200,000 - 2,000,000 = 2,200,000.