Question

In: Accounting

Juniper had revenues of $454,000 in March. Fixed costs in March were $278,720 and profit was...

Juniper had revenues of $454,000 in March. Fixed costs in March were $278,720 and profit was $25,460.

a. What was the contribution margin percentage?

b. What monthly sales volume (in dollars) would be needed to break-even?

c. What was the margin of safety for March?

Expert Solution

For contribution margin first we have to calculate variable cost.

Profit = Revenue from sale - (Fixed cost + Variable cost)

25460 = 454000 - (278720+ Variable cost)

25460 = 454000 - 278720 - Variable cost

Variable cost = 454000 - 278720 - 25460

Variable cost = $149820

a. Contribution margin percentage = [(Total revenue - Variable cost) / Total revenue] * 100

= [(454000 - 149820) / 454000] * 100

= [304180 / 454000] * 100

= 0.67*100

Contribution margin percentage = 67%

b. Breakeven sales volume in dollars = Total fixed expenses / Contribution margin percentage

= 278720 / (67/100)

= 278720 / 0.67

Breakeven sales volume = $416000

c. Margin of safety in dollars = Revenue from sales - Breakeven sales

= 454000- 416000

Margin of safety in dollars = $38000

Margin of safety in percentage = [(Revenue from sales - Breakeven sales) / Revenue from sales] * 100

= [38000/454000]*100

Margin of safety in percentage = 8.37%

ekkarill92 answered 1 year ago

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