Question

Monty Co., a manufacturer of rain barrels, had the following data for 2016.

Sales		2,800	units
Sales price		$50	per unit
Variable costs		$20	per unit
Fixed costs		$70,560
What is the break-even point in dollars? What is the margin of safety in dollars and as a ratio? If the company wishes to increase its total dollar contribution margin by 30% in 2017, by how much will it need to increase its sales if all other factors remain constant? (Round answer to 0 decimal places, e.g. 2,520.) Total increase in sales required:

Answer 1

Break-even point in dollars	Fixed costs/Contribution margin ratio
Contribution margin	Sales price - Variable costs
Contribution margin ratio	Contribution margin/Sales price
Contribution margin	50-20
Contribution margin	$30
Contribution margin ratio	30/50
Contribution margin ratio	60.00%
Break-even point in dollars	70560/60%
Break-even point in dollars	$117,600
Margin of safety in dollars	Actual sales revenue - Break-even sales revenue
Margin of safety in dollars	(2800*50)-117600
Margin of safety in dollars	140000-117600
Margin of safety in dollars	$22,400
Margin of safety ratio	22400/140000
Margin of safety ratio	16.00%
Total contribution margin	30*2800
Total contribution margin	$84,000
Required increase in contribution margin	84000*30%
Required increase in contribution margin	$25,200
Total increase in sales revenue	25200/60%
Total increase in sales revenue required	$42,000