Fontaine Corp. has a selling price of $5 and variable costs of $3,40 per unit. When...

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Answer 1

Answer #1

Contribution = Sales - Variable costs = ($5 * 18,000 units) - ($3.40 * 18,000 units) = $28,800

Contribution Ratio = Contribution/Sales = $28,800/$90,000 = 0.32 (or) 32%

Fixed Cost = Contribution - Profit = $28,800 - $26,240 = $2,560

Break-even sales = Fixed Cost/Contribution ratio = $2,560/0.32 = $8,000

Margin of Safety = Sales - Break even Sales = $90,000 - $8,000 = $82,000

The answer is $82,000

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Answer 2

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