Dallas Inc. sells a product for $62. Variable costs are 60% of sales, and monthly fixed...

Dallas Inc. sells a product for $62. Variable costs are 60% of sales, and monthly fixed costs are $58,776.

a. What is the break-even point in units? (Do not round intermediate calculations.)

b. What unit sales would be required to earn a target profit of $123,256? (Do not round intermediate calculations.)

c. Assume they achieve the level of sales required in part b, what is the margin of safety in sales dollars? (Do not round intermediate calculations.)

Expert Solution

Particulars	Amount (in $)
Selling Price per unit (A)	$62
Variable cost (B) (@60% of $62)	($37.20)
Contribution per unit ( C ) (A -B)	$24.80
Contribution Marin ratio (C / A)	40% ($24.80 / $62)
a)
Break Even Point in units = Fixed Costs / contribution per unit = $58,776 / $24.80 = 2,370 units
Break Even Point in units = 2,370 units
b)
Income desired
Contribution desired = FC+Income
Required Unit sales = (Fixed cost + target profit ) / contribution per unit = ($58,776 + $123,256 ) / $24.80 = $182,032 / $24.80 = 7,340
Total required sales = 7,340 units
c)
Margin of Safety = (Reqd Sales units - Break even point units ) x Selling Price = [7,340 (-) 2,370 ] x $62 = 4,970 x $62 =$308,140
Margin of Safety = $308,140

ekkarill92 answered 2 years ago

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