Here the Breakeven Sales are $90,000 and the contribution margin is 30%
Therefore fixed cost = Breakeven Sales * contribution margin
= $90,000 * 30%
Fixed Cost = $27,000
1. Computation of Margin of safety
Given sales are $110,000
Margin of safety (%) = (Current Sales - Breakeven Sales) / Current Sales * 100
= ( $110,000 - $90,000) / $110,000 * 100
= $20,000 / $110,000 * 100
= 18.18%
OR
Margin of safety (Sales) = Current Sales - Breakeven Sales
= $110,000 - $90,000
= $ 20,000
2. Computation of Net Income in 2019
Given sales are increased by 5% = $110,000 * 105%
Sales in 2019 = $115,500
Fixed cost are reduced by $2,000 = $27,000 - $2,000
Fixed cost in 2019 = $25,000
Contribution Margin is increased to 35%
Contribution Margin (%) = (Sales - Variable Expense) / Sales * 100
35% = ($115,500 - Variable Expense) / $115,500 * 100
0.35 = ($115,500 - Variable Expense ) / $115,500
0.35* $115,500 = $115,500 - Variable Expense
Variable Expense in 2019 = $115,500 - $40,425
= $75,075
Computation of Net Income
Sales $115,500
Less: Variable Expense $75,075
Contribution Margin $40,425
Less: Fixed Cost $25,000
Net Income $15,425
Therefore Net Income in 2019 $15,425.
In 2018, LTW had breakeven sales of $90,000 and contribution margin of 30%. 1. If sales in 2018 were $110,000, what was...
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1.What is the contribution margin per unit?
2.What is the contribution margin ratio?
3.What is the variable expense ratio?
4.If sales increase to 1,001 units, what would be the increase
in net operating income?
5.If sales decline to 900 units, what would be the net
operating income?
6.If the selling price increases by $2.50 per unit and the
sales volume decreases by 100 units, what would be the net
operating income?
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Eastland Corp had total variable costs of $167,706,total fixed costs of $118,500 and total revenues of $254,100Calculate contribution margin ratio Compute the required sales in dollars to breakeven (round answer to 0 decimal places)
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I need assistance with requirements 3,4 and
5, please.
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Questions: 1. What is the meaning of contribution margin ration? How is this ratio useful in planning business operations? 2. In all respects, Company A and Company B are identical except that Company A's costs are mostly variable whereas Company B's costs are mostly fixed. When sales increase, which company will tend to realize the greatest increase in profits? Explain. 3. What is the meaning of operating leverage? 4. What is the meaning of break-even point? Problem: Oslo Company prepared...
please answer all questions
Questions: 1. What is the meaning of contribution margin ration? How is this ratio useful in planning business operations? 2. In all respects, Company A and Company B are identical except that Company A's costs are mostly variable whereas Company B's costs are mostly fixed. When sales increase, which company will tend to realize the greatest increase in profits? Explain. 3. What is the meaning of operating leverage? 4. What is the meaning of break-even point?...
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